Government plans 10% hike in third-party motor insurance premiums

Rising claim severities and cost pressures have pushed third-party motor cover into the spotlight. Reports indicate the government is considering an average increase of about 10% in mandatory third-party premiums, with some categories facing different adjustments depending on loss experience. The discussion sits with the Ministry of Road Transport and Highways and the insurance regulator.

This article outlines what a potential change could mean for car insurance price, how it links to policy structure, and what motorists should review before renewal.

What is being considered
According to recent coverage, ministries and the Insurance Regulatory and Development Authority of India are weighing an average third-party premium rise near 10%. Market segments with heavier losses could see sharper revisions while some protected categories may be treated more cautiously. Timelines are still subject to consultation and may vary by vehicle type. These points come from public reporting rather than final rules.

How third-party rates influence the overall premium
Every private car on Indian roads must carry third-party liability cover. That component is priced annually by the authorities and sits alongside own-damage cover, add-ons and statutory charges in a typical policy. If the third-party element rises, the total payable at renewal generally lifts in line with that change for the liability portion only. The impact on the full invoice depends on the policy’s mix of covers and the insured vehicle’s details.

Relationship with comprehensive insurance
A comprehensive insurance policy combines third-party liability with own-damage protection. Any regulator-led change would apply to third-party damage rates, not to insurers’ own-damage rates. The size of the overall move on a comprehensive package would therefore reflect how much third-party contributes to that policy’s composition, plus any adjustments an insurer makes to own-damage pricing based on claims trends, parts inflation and repair costs.

Why a hike is on the table
Industry commentary has pointed to several pressures that have built up over recent years and are cited in the policy discussion:

• Rising average claim amounts for bodily injury and property damage.
• Court awards and faster settlement cycles are increasing the outgo for liability claims.
• Segment-specific loss experience, particularly in heavier-use categories, creates cross-subsidy concerns and prompts targeted revisions rather than a flat change for all.

These are not final determinations; they are the commonly cited reasons in public reports that explain why an average adjustment is being discussed.

Practical implications for policyholders
A considered response at renewal can help policyholders remain compliant while managing costs responsibly. Key checkpoints include:

• Review cover structure
  Ensure the liability limit and own-damage scope match current usage. A balanced structure avoids paying for unneeded features while staying aligned with legal requirements.
• Preserve your NCB discount
  A clean claims record can deliver valuable savings at renewal through an NCB discount. Preserving eligibility supports affordability even if regulated third-party rates move.
• Account for car age
  Vehicle depreciation influences own-damage premiums, so older cars may see a different overall trajectory than newer ones. Third-party liability remains compulsory regardless of car age.
• Plan for a renewal price hike
  A notified revision would flow into renewal invoices that include third-party. Budgeting for a possible renewal price hike helps avoid last-minute surprises and policy lapses.
• Check category-specific treatment
  Public reports suggest loss-heavy segments could face sharper changes, while some categories might be moderated. Private cars are typically treated differently from commercial vehicles. Final treatment, if any, will be set out only once notified.

What to watch next
Here you will explore what to watch next:

• Official Notification
  The single most important milestone is the formal rate order. Until then, figures remain indicative and subject to change.
• Effective Date and Applicability
  The implementation date and the treatment by fuel type, capacity, or usage category will determine how invoices are adjusted for policies that renew after the effective date. Some reports have noted the possibility of variations by segment to reflect loss patterns; direction will be clear once the notification is published.
• Insurer-Level Adjustments
  Insurers may also recalibrate own-damage pricing in response to claims trends and costs. Those changes are independent of the regulated third-party table and can influence the final bill on a bundled policy.

Key takeaways

• Pointers:
  A regulator-led revision of third-party rates is being considered, with reporting pointing to an average increase of around 10% and scope for variation by category. This is not a final decision until notified.
• The change would affect the policy’s liability component. The overall figure on a comprehensive package depends on the combined effect of third-party and insurer-set own-damage pricing.
• Timely renewal, careful cover selection and protection of NCB discount remain the primary levers available to motorists to keep policies compliant and costs efficient.

Conclusion
With a potential third-party revision on the cards, motorists should prepare calmly and plan renewals early. Keep comprehensive insurance appropriate to vehicle use, protect the NCB discount by avoiding small claims, and budget for a renewal price hike. Consider car age when reviewing cover, and shop prudently to keep the overall car insurance price sensible while remaining fully compliant.