According to people familiar with the matter, IRDAI has proposed an average increase of 18% in TP premiums, with a steeper hike of 20–25% suggested for at least one category of vehicles. The ministry is expected to take a final decision on the matter within the next 2–3 weeks, sources added.
Once MoRTH arrives at a decision, a draft notification could be issued for public consultation, following standard procedures for stakeholder feedback before final implementation.
Motor Third Party insurance, which is mandatory under the Motor Vehicles Act, provides cover for third-party liabilities arising from accidents involving insured vehicles. Notably, TP premiums have remained unchanged for the past four years, even as insurers continue to battle high loss ratios in the segment.
For FY25, motor third party insurance accounted for nearly 60% of total motor insurance premiums and 19% of the general insurance industry’s overall premium, underscoring the weight this line of business holds in the sector’s financial performance.
Loss ratios — a key metric reflecting the percentage of premium paid out as claims — remain high. Public sector insurer New India Assurance posted a TP loss ratio of 108% in FY25, while private insurers Go Digit and ICICI Lombard reported TP loss ratios of 69% and 64.2%, respectively, according to sources.
A 20% increase in TP premiums could help improve the industry’s combined ratio — a measure of underwriting profitability — by an estimated 4–5%, analysts say.
Industry experts have long advocated for regular upward revisions in TP rates to reflect rising medical costs, court-awarded claims, and higher vehicle density on roads. The last revision was made in 2021, and a freeze on increases since then has strained underwriting margins for general insurers.
(Edited by : Poonam Behura)
