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Auto insurers rev up to hike premia

New Delhi, Sept. 11: Owners will have to cough up 20 to 60 per cent more if they want their vehicles insured.

The revision is within the limit set by Insurance Regulatory Development Authority (IRDA), which has permitted a 100 per cent increase in premia to cover losses with owners or a third party at the wheel.

This had sparked a fierce row between insurance companies and truck owners, who have long been railing against a move that would drive customers away. A higher insurance cost pushes up freight charges.

The actual premia will be based on four factors: registration of the car (the zone it belongs to), cubic capacity of the fuel tank, age of vehicle and insured declared value (IDV). Earlier, it was linked to three variables: zone, cubic capacity and insured estimated value.

The compensation for third-party property damage, pegged at Rs 6,000 earlier, has been raised to Rs 7,50,000. The money provided for personal injuries to third parties remains unchanged or unlimited, as earlier.

Under revised third-party rates approved by the Tariff Advisory Committee (TAC), the premium structure for cars and two-wheelers has been increased.

The new premium will be Rs 500 for cars up to 1000 cc, Rs 600 for those ranging from 1000 cc to 1500 cc and Rs 700 for those above 1500 cc. Earlier, the charges were Rs 340 up to 1500 cc and Rs 509 for those over 1500 cc.

Third-party premia on two-wheelers will also go up: It will be Rs 135 on scooters up to 75 cc, Rs 160 on those up to 150 cc, Rs 175 up to 350 cc and Rs 190 above 350 cc. Earlier, the rate was Rs 77 on scooters up to 250 cc and Rs 96 for two-wheelers with a capacity of 250 cc or more.

Motor insurance has been a losing proposition for companies ever since it was introduced. “The claim ratio touched 132 per cent in 2000 and shot up to 145 per cent next year. We hope the new policy will help us recover some of it,” a United India Insurance official said.

The claim ratio for New India Insurance in 2001 was 250-300 per cent; Oriental Insurance’s loss ratio jumped from 115 per cent in 2000 to 154.17 per cent the following year.

Private insurers who have been around for only a year in a market dominated by state-owned firms also concede that insuring vehicles is an unenviable venture. Says Royal Sundaram Alliance managing director Micky Brigg: “The results of motor insurance for our company are mixed and high. It remains a focus area for us and we are taking initiatives to reduce losses.”

IRDA allows a 100 per cent premia hike in the first year, to cover third party risks and losses caused by own damage; it can be doubled if the first raise is not sufficient.

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