Why your vehicle's third-party insurance may soon cost 25% more

The Ministry of Road Transport and Highways (MoRTH) is reportedly reviewing a proposal to raise Motor Third Party (TP) insurance premiums by an average of 18%, following a recommendation from the Insurance Regulatory and Development Authority of India (IRDAI). One category of vehicles may see increases of up to 25%. A final decision is expected within a few weeks.

Why is third-party insurance under pressure?

Although Motor TP insurance is mandatory under Indian law to cover third-party accident liabilities, its premiums have remained unchanged for four years. This freeze has come at a time of soaring medical costs, growing court-ordered payouts, and increased road congestion, all of which have strained insurers.

How bad is the financial strain on insurers?

Public and private insurers have been reporting high loss ratios — the portion of collected premiums paid out as claims. New India Assurance reported a 108% loss ratio, while Go Digit and ICICI Lombard posted 69% and 64.2% respectively. These figures signal mounting underwriting stress and unsustainable margins in the TP segment.

What will be the broader impact on the insurance sector?

In the current financial year, TP insurance accounts for nearly 60% of total motor insurance premiums and 19% of general insurance revenue. Experts estimate that a 20% hike could improve the sector’s combined ratio — a key profitability indicator — by around 4–5%, providing some relief to struggling insurers.

Why does this matter for motorists?

While the proposed hike aims to restore financial balance for insurers, it risks burdening vehicle owners with higher mandatory costs. With no adjustments since 2021, the expected rate revision may come as a sharp blow, especially for categories facing the steepest hikes.