The 2016 Union Budget was announced by the Finance Minister Arun Jaitely. The automobile industry has been also affected from this budget as the Indian government has planned to increase the insurance rate of two wheelers. According to the IRDA (Insurance Regulatory and Development Authority of India), it is expected that the rates will be increased up to 30 percent.
The IRDA has issued a notice to all insurers to bring a long term two wheeler policy (both liability alone and package) for maximum of three years. Following the orders, a few insurers- including ICICI Lombard and New India Assurance have introduced this long-term insurance scheme that covers your bike insurance up to three years.
Mr. Amitabh Jain, head of customer service, motor, ICICI Lombard said in a statement, "While the number of two wheelers is growing exponentially every year, the number of vehicles falling out of the insurance net is also very high. More than 2/3rd of old two wheelers go uninsured. Keeping this in view, having a long-term insurance option for this segment becomes critical so that the maximum number of vehicles are covered under insurance."
According to the IRDA, the insurance rates could be rise of 10-15 percent for below the 350cc engine displacement and 10 percent for bikes having an engine capacity above 350cc.
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The chief officer of IRDA commented, "We need to do a balancing act. The motor insurance portfolio for insurers has been bleeding for many years now. But we can't place the burden of their losses on policyholders. So we can only gradually increase rates to curb losses."
He further said, "Of course a 30% hike again falls short of what insurance actuaries would want - given the loss ratios are between 80-150% for general insurers in the country. To curb losses, what we need is not higher premiums but regularization. We are pushing for the implementation of the Road Transport & Safety Bill and Motor Insurance Act 1988, so that there is a cap on liability, geography and the time period within which a claim can be filed."