The government has proposed not to revise the annual motor third party (TP) premium and even suggested a reduction of premium in a couple of segments in FY 2023-24, which will be now implemented from August 2023.
The Ministry of Road Transport and Highways (MoRTH) came out with the new draft notification on the premium for mandatory third-party motor cover on June 14 and has preferred to retain the same level premiums in most of the categories.
The claims paid data in respect of each of the accident years starting from the year 2011-12 up to 2021-22 has been considered. Besides, gross written premiums for the FY 2011-12 to 2021-22 have been considered. The status quo on TP rates will impact the cash flow of insurers,
The ministry has also proposed reduction of premium in a couple of categories including three wheelers used for carrying passengers with carrying capacity exceeding six passengers particularly for educational institutions where the basic premium will fall from Rs 13,729 to Rs 12,192 and per passenger, it will fall from Rs 839 to Rs 745.
The combined ratio (CR) of the motor TP segment has never fallen from 140 -150 percent in all these years for the industry. The losses in this segment wipe out the total profitability of a general insurer and the company incurs overall underwriting loss, leading to the insurer to depend on the investment income for a net profit.
While going through the yearly premium data, TP premium cosists of the major part of motor portfolio of every non-life insurers