Insurance Premium Hike: Third-party insurance for cars and bikes may become costlier..
Non-life insurance companies in the country are seeking to raise premiums for third-party vehicle insurance. They have approached the insurance regulator, IRDAI, with this request. If approved, this would mark the first hike in third-party insurance premiums since June 2022. Companies are pushing for this increase due to persistently rising underwriting losses and a sharp surge in claim costs.
The motor insurance segment exceeds ₹1 lakh crore in size. In this context, an underwriting loss occurs when an insurance company pays out more in claims than it collects in premiums from vehicle owners. According to an *Indian Express* report, alongside the losses in this segment, a recent Supreme Court ruling has further heightened concerns for insurers; the court ordered that the economic value of the work performed by homemakers (set at ₹30,000 per month) be factored into claim calculations, thereby increasing claim payout costs.
**Potential Hike After June 2022**
The last increase in third-party motor insurance premiums took place on June 1, 2022. At that time, the Ministry of Road Transport and Highways (MoRTH) notified revised rates based on IRDAI's recommendations. Prior to 2022—specifically during the COVID-19 pandemic (FY2021 and FY2022)—the central government had frozen rates to alleviate the financial burden on vehicle owners.
**Loss Ratio Could Rise by Up to 15%**
In a ruling delivered on June 11, 2026, the Supreme Court recognized the economic value of the unpaid domestic work performed by homemakers when determining compensation under the Motor Vehicles Act. According to reports, this decision provides for compensation under the 'loss of domestic care' category based on a monthly income of ₹30,000—an amount that will increase periodically in line with inflation. Preliminary estimates suggest that this decision is likely to raise the industry's motor third-party (TP) loss ratio by 12% to 15%. Insurance companies argue that raising rates is essential to restore premium adequacy.
**Third-Party Insurance Accounts for 60% of Motor Insurance**
Third-party insurance is mandatory for vehicles in the country. It covers damages caused to others (third parties), whereas 'Own Damage' (OD) insurance covers losses to one's own vehicle. Data indicates that in the financial year ending March 2026, third-party insurance alone accounted for ₹64,227 crore (60%) of the total motor insurance premiums of ₹1.08 lakh crore collected by insurance companies.
Most insurance companies have a motor portfolio skewed towards third-party insurance because the 'Own Damage' (OD) segment entails high service requirements and a higher claim frequency (up to 25%). Consequently, insurance companies are urging the government to increase third-party insurance rates.
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