a new insurance model

IRDAI Increases Third-Party Insurance Premium Rates in 2016

IRDAI Increases Third-Party Insurance Premium Rates in 2016

Insurance-Net-Written-Premium-Calculation

Image via Flickr

A third-party insurance policy protects policy holders from liabilities that may arise in the event of an accident leading to the damage of a vehicle, injury or even a death. Usually, the third party motor insurance is a part of the main policy. Some insurers offer this as a standalone cover as well. In India, third-party insurance is an essential requirement for every car owner buying an insurance cover. Under Motor Vehicles Act 1988, third party liability cover has been made mandatory in India.

About Third-Party Motor Insurance

A third-party vehicle insurance can be defined as the policyholder’s insurance against disability, death or damage caused to a third-party, in case of an accident. At times, this third-party insurance is also called the “Act Only” cover as it applies to a third person involved in an accident, instead of the vehicle owner or the insurer.

Effective from 1st April, 2016, IRDAI (Insurance Regulatory and Development Authority of India) has increased the third-party motor premiums. The new rates indicate a 40% rise in the car insurance premiums and a 25% hike in two wheeler insurance premiums. The third-party rates for commercial vehicles will increase by 5% to 30%. In case of loss of a life, the coverage is unlimited. In the event of damages to a property, the maximum coverage provided is 7.5 lakhs. Third party insurance will not cover the losses which are incurred on insured’s own property.

Third-Party Insurance Premium Rates Raised

A motor insurance can be categorized into two basic components – comprehensive cover and third-party insurance. Premium on the comprehensive cover is determined by the auto insurance companies, whereas premium on third party cover is decided and fixed by IRDAI. The third party insurance premiums are reviewed by IRDA annually and revised based on the cost inflation and the claim statistics.

In the last 5 years, IRDA has increased the insurance premium, every year. Keeping in view the large losses faced by insurance companies and a rise in cost inflation index by 5.57%, IRDAI has decided to hike the premium rates for third party insurance, this year, as well for all segments of two-wheelers and cars. While ascertaining the need to hike rates, IRDAI has referred to the Insurance Information Bureau. An additional factor that led to the increase in premium rates is the rise in service tax owing to additional cess.

An Overview on New Third-Party Insurance Premium Rates

Let’s take a look at the latest third-party premium rates as laid down by the IRDA:

Cars Old Premium Premium for 2016-17 % Increase
Upto 1000 cc Rs. 1468 Rs.2055 40%
1000cc to 15000cc Rs. 1598 Rs.2,237 40%
1500cc and above Rs. 4931 Rs. 6,164 40%
Two-Wheelers Premium for 2016-17
Upto 75cc Rs.569
75cc-150cc Rs.619
150cc-350cc Rs.693
350cc and above Rs.796

It is important to note that rates have also been increased for three-wheelers. Although the hike is steep from the policy holder’s point of view, it isn’t that steep from the perspective of insurance companies. It has been estimated that an 80% hike in the premium rates would be required to effectively combat the losses faced by insurers.

Insurers have been warned by IRDA against refusing any third-party claims. All insurers are now required to offer third-party covers online to make it easy for vehicle owners to easily compare insurance quotes online and buy one with comprehensive third-party covers.

Incurred Claim Ratio Decreases over the Years

IRDAI data reveals that an increase in third-party insurance premiums in the last few years has offered some respite to insurers in the motor insurance category. The increase in tariff has helped insurers limit their loss ratio to some extent.

The incurred claim ratio for the motor insurance segment was 77% in financial year 2014-15 as compared to 80% in financial year 2013-14. The incurred claim ratio can be defined as the ratio of net incurred claim to net premium. Or in simpler terms, it is the number of claims received for the premiums paid. A lower incurred claim ratio indicates healthy growth and higher profitability for the insurer.


Financial Benefits of Security Investments for Business

business angelRunning a successful business requires a great deal of work. It’s not enough just to do the work, you have to take various other aspects into consideration, from advertising in order to develop a strong customer base to making sure that your business is properly protected from any potential legal recourse.

It doesn’t just benefit your business overall to invest in security measures; in the long-term, it’s also a wise move from a financial perspective. By investing in security for your business, you can save money whilst protecting your most important assets. This is especially true for small to medium sized businesses who stand to lose more than a big corporation or brand name.

There are various security measures that businesses can take in order to keep their enterprises safe, providing your business with cost-effective and efficient protection.

Physical Measures

Some companies take extra precautions to keep their business secure. A common practice is to hire security staff to monitor the premises overnight, though this isn’t always practical smaller businesses that don’t necessarily have the budget to outsource in this way.

Alternatively, you can invest in physical security measures such as electrified and motorised fences from a company like Paramount Steel.

Insurance

Though it seems cynical, businesses should expect the worst in order to cover all the bases. A good insurance policy will keep your business protected and covered for a variety of possibilities and potential incidents, from attempted burglaries and vandalism to on site accidents that couldn’t be avoided.

Incidents like this can set your business back in a big way financially, but a good insurance policy will prevent you from making any significant losses and get you back on track as soon as possible.

insurance_deals

Software

It’s not just about physically protecting your assets in business, it’s also important that you consider the non-physical aspects as well. Most businesses do the majority of their work with computers and online, so keeping your files safe is extremely important, especially if you deal with sensitive third party information, financial data and so on.

There are plenty of data security options to help companies keep their most important files safe from hacking and any major error that could have a serious impact.

Mistakes cost money, and mistakes do happen, but by investing in proper security measures businesses can protect themselves and benefit financially in the long term. After all, less incidents means that more money goes back into the business rather than being paid out to clear up the mess.


Finding Fault – Insurance Premium Rises and Modern Day Myths

Finding Fault – Insurance Premium Rises and Modern Day Myths


Allegedly we are gradually falling into that most awful of social pits – a compensation culture.  With the justice minister Jonathon Djanogly announcing recently that the referral fees paid to insurance companies by solicitors will be banned.  Djanogly has stated that this compensation culture is responsible for driving up the costs of insurance premiums (last year it was the bad weather) and believes that it is time something should be done.  Having checked their income streams from the referral fees the insurance companies have decided, on balance, it might be worth agreeing.  To be fair, Djanogly has no reason to like the concept of compensation – along with many other MPs he agreed to repay some of his expenses claims in 2009, £25000 in his case.  Ouch; damn those, erm, “moat-cleaning-costs-chasing” civil servants.

Losing profits

In the ministerial sights are, of course, those terrible solicitors and law firms who actually try to encourage victims of accidents to seek compensation.  The argument runs that the cash strapped insurance companies have to push up everyone’s premiums to cover the cost of paying out on claims for personal injuries (and snow, and young drivers, and, well you get the picture).  The fact that one company admitted to £9 million in pre-tax profits made from referral fees to solicitors is largely ignored.  However, what the furore over referral fees and insurance premiums seems to largely ignore is the judicial system.  That would be those people in the funny wigs who ultimately decide where blame lies and who gets what in the compensation culture.

Judging matters

It’s true – some of the cases that make the headlines make you think the world has gone just a little (or a lot) mad.   However, headlines are one thing and court judgements are quite another.  One boy recently attempted to claim that a broken arm sustained while jumping off a swing was due to the negligence of a local council for not stopping him.  I’m not a great fan of local councils, but let’s face it you can’t be everywhere at once; nor can you stop every child in the district jumping off stuff that has an element of risk relating to its speed and height.  Thankfully, for common sense at least, the judge found in favour of the council.

While it’s easy to blame insurers and solicitors for this type of claim they usually do mention the phrase “have you had an accident that wasn’t your fault” in their advertising.  It’s not even in the small print and perhaps for the boy and his family the phrase “your fault” should have rung some alarm bells.   I jumped off more than one speeding object in my childhood and resulting grazes did not have me running for the law; quite the opposite on most occasions.  The very simple point being that ultimately these cases are subject to judicial decisions.  They’re not decided by solicitors, ambulance chasing or not, nor by insurance companies.  Despite what some people might think, judges often exhibit an incredible amount of common sense.

One other, far more tragic case, illustrates this point equally well.  In June 2007 a young boy was killed in Norfolk when a tree fell at a National Trust property.  The subsequent case claiming compensation for the victim and several others injured in the incident eventually found in favour of the National Trust – on the basis that there is “no such thing as a completely safe tree”.  The ruling perhaps underlines that sometimes a tragic accident is just an accident.

A new insurance model?

The banning of referral fees will probably have little effect on the number of claims made through the courts – figures suggest this number hasn’t risen while the ‘no win no fee’ system has been in place.  Judges will ultimately continue to make judgements based on ‘fault’ or lack of it.  Accidents will continue to happen and insurance premiums will continue to rise.  To make up for the loss of referral fees perhaps the insurance companies could introduce a new policy to insure against the cost of insurance premiums rising. Don’t hold your breath though, as claims on this type of policy would almost certainly hit their profits.

Despite rumours to the contrary we probably don’t live in a compensation culture. Ultimately the judicial system is responsible for determining where fault lies if at all. A personal injury solicitor Edinburgh can offer advice if you have had an accident that was not your fault.


%d bloggers like this: