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Rise of Third Party Motor Insurance Premium and Its Impact

Published on May 25, 2020. EST READ TIME: 5 MIN

Motor insurance is the insurance policy meant for vehicles. It includes two-wheeler insurance and car insurance policies among others.Purchasing motor vehicle insurance is no longer a choice.It is legally mandatory to have third party motor insurance before you hit the road. Motor insurance policy provides financial cover against the below-mentioned losses.

  • Any loss or damage caused to the insured vehicle due to accidents.

  • Loss or any damage to the vehicle due to natural calamities like earthquake, fire, and lightning, landslide, etc. or manmade acts such as theft, burglary or riots.

  • Third-party liabilities that might arise due to any damages incurred either by the third party vehicle or injuries caused to third party person due to an accident that involves the insured vehicle.

Motor Insurance-A Legal Requirement

The Motor Vehicle Act, 1988 makes it compulsory for all the vehicles on Indian roads to have a third party motor insurance policy before the vehicle is driven. Some of the major legal provisions, which are included under the Motor Vehicles Act, 1988 are vehicle registration, valid driver's license, and an insurance cover.

Violation of rules laid down in the Motor vehicles Act, 1988 can lead to heavy penalties and imprisonment of the vehicle owner.Moreover, the third party liability cover provided by motor insurance covers the vehicle owner/driver in case of any litigations or legal proceedings due to damage/loss caused to third party person/vehicle.

The Rise in the Premium of Third Party Motor Insurance

Last year, the Insurance Regulatory and Development Authority of India (IRDAI) raised the premium rates for Motor Third Party insurance for the current financial year, i.e. 2019-20. Starting June 16, 2019, third-party motor insurance premium rates for both cars and two-wheelers have increased between 4-21%. 

a. For private cars having an engine capacity of less than 1000cc, there has been a third-party insurance premium hike of 12%. For those cars whose capacity lies between 1000cc to 1500cc, there has been a premium rise of 12.50%. But, for private cars whose capacity does not exceed 1500cc, there has been no rise in the third-party insurance premium.

b. For two-wheelers with a capacity not exceeding 75cc, the premium hike is 12.88% whereas it is 4.44% in the case of two-wheelers whose capacity exceeds 75cc but not 150cc. Also, for those two-wheelers which have a capacity of more than 150cc but do not exceed 350cc the insurance premium hike is 21.11%. However, for two-wheelers whose capacity exceeds 350cc, there have been no changes in the insurance premium.

Impact of the increased third party motor insurance premium

The increase in third-party motor insurance does not have much impact on the new business or on new purchases as there have not been many changes in the insurance premium of those two-wheelers or cars that have been purchased recently. As there have been slight changes in the premium of the motor insurance for the older vehicles, it creates a sense of urgency amongst vehicle owners to purchase insurance plans as early as possible as the plan may roll out anytime in near future.


Hence, with the new regulations passed under Motor Vehicle Amendment Act 2019 by the Union Government , it has become very clear that third party motor insurance continues to be mandatory. With the rise in third party insurance premium vehicle owners in India are going to be more proactive in obtaining the insurance now.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to policy wordings and prospectus before concluding the sales.

This blog has been written by

Mukesh Kumar | Motor Insurance Expert | 36+ years of experience in insurance industry

A veteran in the insurance industry, Mukesh Kumar has the expertise of handling various functions like Business Development, Underwriting, Claims, Human Resources, Quality Management and Marketing. With rich knowledge of the industry, he loves to share his views on topics of insurance sector and takes special interest in educating people on advantages of having insurance.

Mr. Mukesh Kumar recommends "getting your two wheeler insured from HDFC ERGO, a brand serving more than 1 crore+ customers. With overnight repair services and more than 6,800+ network garages, you can be assured of help in event of any damage to your vehicle

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