Consumers, feeling price pressure due to rising inflation, have been dealt a further blow as buying a vehicle will now become costlier from June 1 with the government increasing third party motor insurance premium rates.
In a notification issued on Wednesday, the Ministry of Road Transport and Highways (MoRTH) has increased third party premium rates for all categories of vehicles, adding to the total cost of buying a vehicle.
Unlike other insurance products, motor vehicles are mandated by law to purchase third-party insurance. This insurance cover is taken for any collateral damage caused to a person (third party) in cases of road accident.
As per the revised rates notified by MoRTH as Motor Vehicles (Third Party Insurance Base Premium and Liability) Rules, 2022, whose rates will be applicable on private cars with engine capacity of 1,000 cc? compared to 2,094 2,072 in 2019-20. Similarly, the rates will be applicable on private cars with engine capacity between 1,000 cc and 1,500 cc. compared to 3,416 3,221, while owners of cars above 1,500 cc will see a drop in premium from 7,897 7,890.
Two wheelers above 150 cc but above 350 cc will attract a premium 1,366 and the revised premium for two wheelers above 350 cc will be 2,804. Similarly, for commercial vehicles with a gross vehicle weight of more than 7,500 kg, the rates of base premium have been kept at 16,049. Third-party premiums kept low for agricultural tractors up to 6 HP 910.
The rates have also been revised for three year third party single premium plan for four wheelers and five year single premium plan for two wheelers. Also, battery-powered green electric vehicles will also have to pay more for third-party insurance premiums from next month.
The insurance premium rates were frozen for the last two years due to the COVID-19 pandemic. Earlier, TP rates were notified by the Insurance Regulatory and Development Authority of India (IRDAI). This is the first time that MoRTH has notified TP rates in consultation with the insurance regulator.
Even with higher third-party insurance premiums, MoRTH has provided a 15% discount on the premium for educational institution buses. A private car registered as a vintage car is allowed a discounted price of 50% of the premium and a discount of about 15% and 7.5% on the premium for electric and hybrid electric vehicles respectively.
With the late notification of new rates, insurance companies will have less than a week to update their systems with the changes. Earlier, premium revision was done annually, taking into account inflation and claim rates.