Third Party Motor Insurance Premiums May Rise: Here’s WHY Insurers Push For First Hike In Four Years

Non-life insurance companies in India are actively seeking the first hike in third-party motor insurance premiums in four years, citing increasing underwriting losses and the financial impact of a recent Supreme Court ruling. If you have a vehicle, then you must know that third-party coverage is a mandatory requirement for all vehicles on Indian roads, and this development could lead to higher insurance renewal costs for cars and bikes.

Why Are They Seeking A Premium Hike?

According to insurers, the current premium rates have become unsustainable due to rising claim costs and substantial losses in the motor insurance segment, as per media reports. Third-party insurance, which covers injuries, death, or property damage caused to third parties in accidents, constitutes nearly 60 per cent of India’s Rs 1.08 lakh crore motor insurance market. Insurance companies usually describe the segment as increasingly loss-making.

Public sector insurer New India Assurance recently highlighted the sector's financial strain, reporting that its motor underwriting losses surged by more than 57% year-on-year to Rs 1,297.2 crore in the April-June quarter of FY27.

The last revision to third-party premiums took effect on June 1, 2022. Before that, rates had remained largely unchanged during the Covid-19 years, as the government froze premiums to alleviate the financial burden on vehicle owners.

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Impact of the Supreme Court Judgment

A significant factor driving the industry's push for a rate revision is a judgment delivered by the Supreme Court of India on June 11, 2026. The judgment introduces a new category of compensation—"Loss of Domestic Care"—calculated based on a monthly income of Rs 30,000, with periodic adjustments for inflation and socio-economic changes. Insurers warn that this ruling will substantially increase claim payouts.

ICICI Lombard has estimated that the judgment could drive the industry's third-party motor loss ratio up by 12% to 15 per cent. In response to this ruling, the insurer has already recognised Rs 165 crore in additional claim reserves during the current quarter. 

Under Review 

The Insurance Regulatory and Development Authority of India (IRDAI) is currently reviewing third-party tariffs before submitting recommendations to the Ministry of Road Transport and Highways (MoRTH), the authority responsible for notifying premium rates.  The review will evaluate claim experiences across specific vehicle categories, rather than implementing a blanket increase across all segments.