Hike in third party insurance premiums to hit auto sales further: FADA

Federation of Automobile Dealers Associations (FADA) Thursday said the hike in third-party motor insurance premiums for FY20 will further hit vehicle sales, which have already been witnessing a prolonged slump.

Insurance Regulatory and Development Authority of India's (Irdai) order to hike premium rates for the third party motor insurance for the current financial year will come into effect from June 16.

"The automobile industry is already going through a difficult phase with low sales and subdued customer sentiments.

"This sudden change in price hike of third party insurance will again dent the pace of sales, specially the 2W category which is already reeling under price hike for mandatory 5 years insurance and ABS/CBD implementation," FADA Hony Secretary Manish Raj Singhania said in a statement.

Asking Irdai to reconsider the hike, Singhania said this increase would significantly impact sales volume, also affecting insurance business.

As per the order, the third party insurance premium for private cars with less than 1,000 cc will be Rs 2,072, up from Rs 1,850 while for those exceeding 1,000 cc but less 1,500 cc will be Rs 3,221 as against Rs 2,863 earlier.

For cars with engine capacity exceeding 1,500 cc it will remain at Rs 7,890.

For two-wheelers also, the third party insurance premium for those with less than 75 cc engine capacity has been increased to Rs 482 from Rs 427.

Likewise, two-wheelers with engines exceeding 75 cc but less than 150 cc will attract premium of Rs 752 as against Rs 720 earlier. For those exceeding 150 cc but below 350 cc the premium will go up to Rs 1,193 from from Rs 985.

The insurance regulator has, however, kept unchanged premium on two-wheeler exceeding 350 cc engine capacity at Rs 2,323.

"Going forward, we would require substantial support from all quarters and specially the insurance industry to help the automobile industry to recover from the slowing demand effected by the uncertainty around NBFC and the previous regulation passed for collecting three and five years of premium for new cars and two-wheelers, respectively," Singhania said.

FADA, however, said it welcomed the proposed 15 per cent discount on third party insurance on electric vehicles (private cars and two wheelers) although the sales of such vehicles are very minuscule.