TomorrowMakers ™

Insurance Basics

Increase in non life insurance premiums. How will it impact existing and new policy holders?

12 April 2017
With insurance premiums expected to increase from 1st April 2017, you should know how it will affect you.
 

The IRDAI recently granted insurance companies the permission to increase the insurance premium for two-wheelers, cars, and health, from 1st April 2017. The insurance body has clarified that this increase will only impact existing rates by around +/- 5%. Even so, this increase might be seen as a double whammy for the general public, considering the recent hefty hike in third party premium rates for vehicle insurance.

Reason behind increasing insurance premiums

The increase is meant to facilitate the payment of rewards to intermediaries and agents. This increase has been rolled out as part of the provisions of the IRDAI (Payment of Commission or Remuneration or Reward to Insurance Agents or Insurance Intermediaries) Regulations 2016. This regulation has introduced a reward system for agents and intermediaries and will also bring about revision in remuneration/commission rates.

Related: Key factors that affect car insurance premium

Insurance experts believe that this increase, coupled with the fact that insurance premiums have already come under the ambit of service tax, will impact the entire insurance sector. New policy holders will be impacted more than others, as they will have to pay higher premiums now.

Other effects that this will have include:

  • This increase will impact both, the middle-class, and upper-class customers
  • Those enrolled in specific health care schemes will be impacted
  • Even a marginal increase in premiums will greatly impact low-income consumers of healthcare schemes.

So far, the IRDAI has proposed an increase of 50% in insurance premiums for motorcycles and cars from the beginning of April 2017. This is applicable on mid-segment cars, big cars, superbikes, sports bikes and even entry level bikes. Commercial vehicles will also fall into this category. Vintage cars, on the other hand, will be given a 25% discount in premium rates.

It is expected that there will be some impact on the persistency i.e. the number of policies that are active after the first year. The number is expected to go down, at least in the short term due to the premium increase. 

Related: Comparing car insurance- how to choose the right policy

However, policy holders who bought their insurance before 1st April 2017 will not be affected by the increase in premium rates. Insurers must provide a certificate stating that there is ‘no detrimental change’ in the premiums or any other provisions to policies sold before 1st April.

 

 
 
 

Quotes of The Day

POLL

 

MOST VIEWED CONTENT

Understanding how student travel insurance works
Insurance Basics

Understanding how student travel insurance works

Given the high cost of medical expenses in developed nations, having appropriate insurance cover is a must for students travelling abroad for education and exploration alike.

6 compelling reasons why you need Home Insurance
Insurance Basics

6 compelling reasons why you need Home Insurance

A home is more than 4 walls and carefully picked out paint. It’s about security, comfort and love. And home insurance is the best way to mitigate any damage that may be caused to it.

Regulations in life insurance industry
Insurance Basics

Regulations in life insurance industry

KS Gopalakrishnan, MD & CEO, Aegon Life Insurance talks on regulations in Life Insurance Industry in India

5 Odd insurance covers you won’t believe exist in India
Insurance Basics

5 Odd insurance covers you won’t believe exist in India

Do you have a valuable possession you always wanted to insure but weren’t sure if it was possible to do so? After reading about these 5 strange insurances being availed in India, you’ll have your answer.

What to do after the death of your next of kin (Part 1)
Insurance Basics

What to do after the death of your next of kin (Part 1)

Parting from a loved one is always difficult and there is no parting more difficult and grievous than the one that comes with death. However, even in such unfortunate circumstances, there are certain obligations that you need to fulfil.

Market Instability & ULIPs in India
Insurance Basics

Market Instability & ULIPs in India

KS Gopalakrishnan, MD & CEO, Aegon Life Insurance talks on Market Instability & Unit Linked Insurance Plans in India

Common mistakes while purchasing insurance
Insurance Basics

Common mistakes while purchasing insurance

KS Gopalakrishnan, MD & CEO, Aegon Life Insurance talks on 'What mistakes do consumers commonly make when purchasing Insurance plans'.

boy

We would love to hear from you!

Question, comment or concern? Our contact form is the best way to get in touch. We will respond to you within 5 working days.

NEWSLETTER