Vehicle owners across India may soon face a hike in their annual expenses, as the Insurance Regulatory and Development Authority of India (IRDAI) has proposed a significant increase in third-party (TP) motor insurance premiums. The regulator has suggested an average hike of 18%, with some vehicle categories potentially seeing a jump of up to 25%, pending approval from the Ministry of Road Transport and Highways (MoRTH).
Why Is a Premium Hike Being Proposed?
Third-party insurance is mandatory for all vehicle owners in India. It covers liabilities arising from damage caused to another person or their property due to a road accident. While this insurance is essential, its pricing has remained unchanged for the last four years, despite mounting financial pressure on insurers.
According to IRDAI and industry insiders, insurance companies have been incurring substantial losses on TP insurance due to rising medical costs, court-ordered compensations, and the increasing frequency of road accidents. The sustained losses are threatening the financial health of the motor insurance sector, prompting calls for a revision in premium rates.
The Scale of Financial Losses in TP Insurance
The numbers reveal the severity of the situation:
New India Assurance, a government-owned insurer, reported a third-party loss ratio of 108% in FY2025. This indicates that for every ₹100 collected as premium, the company paid ₹108 in claims.
Among private insurers, Go Digit and ICICI Lombard faced loss ratios of 69% and 64.2%, respectively.
Motor TP insurance alone makes up 60% of total motor insurance premiums and 19% of the general insurance industry’s total premiums, underscoring its critical importance in the insurance ecosystem.
What’s Next in the Decision-Making Process?
The central government is expected to review the IRDAI proposal within the next two to three weeks. Once approved in principle, a draft notification will be issued, inviting public feedback from stakeholders, including consumers and industry representatives. The final rates will be notified after careful review of all inputs.
Industry experts believe that an increase of 20% in TP premiums could improve the insurance sector’s combined ratio by 4–5%, boosting overall underwriting profitability.
What It Means for Vehicle Owners
For everyday drivers, this proposed change would increase the cost of mandatory third-party insurance, which is a non-negotiable requirement for registering and renewing vehicles in India. While the hike may not be welcome news for personal finances, experts argue it’s a necessary move to keep the insurance system viable and ensure timely claim settlements.
Given the rising number of road accidents and increasing litigation-related payouts, this step may also help strengthen protections for victims of road mishaps.
Vehicle owners are advised to stay informed and plan ahead for potentially higher insurance costs during their next renewal cycle.
Author Profile
- My name is Kuldeep Singh Chundawat. I am an experienced content writer with several years of expertise in the field. Currently, I contribute to Daily Kiran, creating engaging and informative content across a variety of categories including technology, health, travel, education, and automobiles. My goal is to deliver accurate, insightful, and captivating information through my words to help readers stay informed and empowered.
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