Vehicle Insurance To Become Costlier. Here's How Much You'll Pay

If you own a car or bike, your next insurance renewal could become more expensive.

General insurance companies are pushing for the first increase in third-party motor insurance premiums in four years. They say mounting losses, rising claim costs and a recent Supreme Court ruling have made the current premium rates unsustainable. 

Third-party insurance is mandatory for every vehicle on Indian roads. Unlike own-damage cover, it pays for injuries, death or property damage caused to someone else in an accident.

The last revision in third-party premiums came into effect on June 1, 2022. Before that, rates remained largely unchanged during the Covid-19 years after the government froze premiums to reduce the burden on vehicle owners. 

The pressure on insurers has only intensified since then.

According to industry data, third-party insurance accounts for nearly Rs 64,200 crore, or about 60 per cent, of India's Rs 1.08 lakh crore motor insurance market. Yet insurers say this segment has become increasingly loss-making. 

Public sector insurer New India Assurance reported that its motor underwriting loss surged more than 57% year-on-year to Rs 1,297.2 crore in the April-June quarter of FY27, up from Rs 824.6 crore a year earlier. 

Impact Of Supreme Court Ruling

The industry's concerns have also grown after a June 2026 Supreme Court judgment recognised the economic value of unpaid domestic work by homemakers while calculating compensation under the Motor Vehicles Act. Insurers say the ruling will significantly increase claim payouts.

ICICI Lombard has estimated that the judgment could raise the industry's third-party motor loss ratio by 12-15 per cent. The insurer has already set aside an additional Rs 165 crore as claims reserves following the verdict. 

IRDAI is understood to be reviewing third-party tariffs before making recommendations to the Ministry of Road Transport and Highways, which notifies premium rates. The review is expected to assess claim experience across different vehicle categories instead of imposing a flat increase across all segments. 

Is The Hike Justified?

Rakesh Kumar, Founder and Managing Director of Square Insurance, believes a revision is both justified and long overdue.

"After four years without a revision, an adjustment in third-party motor premiums is a reasonable and overdue step. Third-party insurance makes up nearly Rs 64,200 crore, about 60 per cent of India's Rs 1.08 lakh crore motor insurance pool, yet insurers are under real strain," he said.

Kumar noted that while a 10-15 per cent increase in third-party premiums may sound significant, its impact on customers would be relatively modest because third-party cover is only one part of the total motor insurance premium.

"A 10-15 per cent TP hike would likely mean only a 4-8 per cent rise overall, or roughly Rs 400-800 more on a Rs 10,000 annual premium. This is a necessary step to keep the ecosystem sustainable and ensure timely, fair compensation for accident victims," he added.