Although third-party motor insurance was not a product that historically made large profits for insurance companies, the tide seems to have turned now. Third-party liability insurance is currently raking in the profits for insurance firms due to increased premiums and mandatory auto safety regulations stipulated by the government. The insurance premiums were raised by the IRDA so that the prices are in alignment with the loss ratio in the industry.
The third-party motor insurance plan offers coverage to the policyholder for legal liability arising from accidental injuries, death, or property damage of a third party.
General insurance companies have reported collections of Rs.26,523 crore through the sale of third-party motor insurance in the last fiscal. This has eclipsed the collections from the sale of own-damage plans that stood at Rs.23,727 crore. This information was published by the Insurance Regulatory and Development Authority of India (IRDA) in a recent report.
The head of reinsurance at ICICI Lombard, Sanjay Datta, mentioned that third-party liability insurance has become a money-spinner in the recent past due to various reasons. This includes hike in premium for third-party policies and reduction in own-damage claims.
Private insurance firms such as Reliance General Insurance, Cholamandalam MS General Insurance, and Shriram General Insurance are now making more profits from third-party liability insurance policies than own-damage plans. Own-damage policies offer coverage to the insured vehicle for losses arising from accidents, collisions, or theft.
Last year, Shriram General Insurance wrote third-party insurance worth Rs.1,247 crore and own-damage insurance worth Rs.589 crore. At the same time, Chola Insurance wrote liability-only insurance worth Rs.1,243 crore and motor own-damage insurance worth Rs.922 crore. Reliance General Insurance wrote third-party insurance worth Rs.1,011 crore, as opposed to Rs.952 crore in the last fiscal.
The IRDA, during the course of the last financial year, has increased the premiums for third-party liability covers by 28% for cars with engine capacity in the range of 1,000 cc to 1,500 cc and above. The Motor Vehicles Act, 1988, also mandates third-party liability insurance for all motor vehicles in India.