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Exposure Draft
Ref. No: IRDA/NL/MTP/2019-20/EXDRF Date: 20-05-2019
Exposure Draft on Revision in Premium Rates for Motor Third Party Insurance Cover for the Financial Year 2019-20

By virtue of powers vested in the Authority under Section 14 (2) (i) of the IRDA Act, 1999, the Authority has been notifying the premium rates applicable to Motor Third Party (TP) Liability Insurance, every year, starting from 2011.

     Further to the notification of the Authority vide order ref: IRDA/NL/ORD/MOTP/051/03/2019 dt: 28th March,2019, the Motor Third Party Premium rates for the year 2019-20 (ending 31st March, 2020) for various categories of vehicles, which shall come into force from the date to be notified, have been arrived at as follows:

I.            Data Source and Data Used:

1.     The data provided by the Insurance Information Bureau of India (IIBI) has been used for arriving at the Motor TP premium rates.

2.     The claims paid data in respect of each of the accident years starting from the year 2011-12 up to 2017-18 has been considered, taking into account the combination of 'Class Code' and 'Vehicle CC/PCC/GVW' Code.

3.     Gross Written Premiums for the FYs 2011-12 to 2017-18 have been considered.

 

II.          Basic Methodology

1.   The ultimate claims cost for each accident year has been estimated using the actuarial technique of Basic Chain Ladder Method applied to cumulative paid claims data.

2.     Based on the analysis of paid claims data, cumulative paid claims triangles for valid combinations of class codes and CC/PCC/GVW codes have been populated for AYs 2011-12, 2012-13, 2013-14, 2014-15, 2015-16, 2016-17 and 2017-18.

3.     The main characteristic of the technique is that ultimate claims for each accident year are estimated from the recorded paid values till date, thereby assuming that the future development of payment and movement of paid claims would be similar to the pattern of payment and movement of paid claims during prior years.

4.     The selection of age-to-age-factors (ATAFs) has been done after considering various averages of ATAFs like simple average of all years, volume weighted average, average of last 3 years/ last 5 years, highest of all averages etc.

5.     It is observed that the ATAFs for the most developed periods available are significantly higher than 1.00. This is in line with the fact that motor third party insurance is a long-tail line of business and complete run-off occurs after a significant period of time.

6.     The oldest accident year has 7 years of development, which is generally not sufficient to fully run-off the paid claims for that accident year. Hence, ATAFs for a further 5 years of development have been projected by considering movement of expected future ATAFs on the lines of the past available years of development. A multiplication of these estimated ATAFs is considered as ‘tail factor’. A tail factor would project the paid claims from the latest development period to the ultimate.

7.     The ultimate expected claims for various accident years are estimated by considering cumulative development factors (age-to-ultimate) and the latest cumulative paid amount for a particular accident year. The ultimate claims amount is estimated for each accident year.

8.     Based on the class codes and CC/PCC/GVW codes, financial year-wise Gross Written Premiums (GWP) from the premium data have been populated. The financial year-wise Gross Written Premium have been converted to financial year wise Gross Earned Premium (GEP) by applying the formula:


 

9.     Ultimate Loss Ratio (ULR) for each Accident year is calculated as Ultimate Claims/Gross Earned Premium

 

 

10.  Burning Cost (BC) for each Accident year is then calculated by multiplying Ultimate Loss Ratio and Pure Third Party Premium. The Burning Cost calculated represents the claims cost for only Third Party claims excluding PA claims. Burning Cost has been calculated by considering some of the recent developments post the data period.

 

 

11.  By considering the Burning Cost and loading it with appropriate expenses, Premium rates for the FY2019-20 have been derived.

12.     The actuarial rates have been arrived at after factoring in the necessary assumptions and after smoothening, wherever necessary.

 

III.        As for the Vintage Cars segment, there is no substantial data relating to the past experience. A discounted price of 50% of the proposed rate based on the erstwhile Indian Motor Tariff (IMT) has been proposed for those private cars identified as Vintage Cars by the Vintage and Classic Car Club of India.

IV.         A discount of 15%, on Motor TP premium rates for Electric Private Cars and Electric Two wheelers, is proposed. This will be an incentive to use environment friendly vehicles.

 

The details of proposed Motor TP premium rates for the various classes of vehicles are tabulated below: 


Table I

Category

Vehicle Type

Existing Rates (Rs)

FY 2018-19

Proposed Rates

(Rs)

FY 2019-20

 

Private Cars*$

 

Not exceeding 1000 cc

1,850

2,120

 

Exceeding 1000 cc but not exceeding 1500 cc

2,863

3,300

 

Exceeding 1500 cc

7,890

7,890

 

Two Wheelers*

 

Not exceeding 75 cc

427

482

 

Exceeding 75 cc but not exceeding 150 cc

720

752

 

Exceeding 150 cc but not exceeding 350 cc

985

1,193

 

Exceeding 350 cc

2,323

2,323

A1

Goods Carrying Vehicles Public Carriers (other than 3 wheelers)

 

GVW not exceeding 7500 kgs

14,390

15,746

 

 

Exceeding 7500 kgs but not exceeding 12000 kgs

24,190

26,935

 

Exceeding 12000 kgs but not exceeding 20000 kgs

32,367

33,418

 

Exceeding 20000 kgs but not exceeding 40000 kgs

39,849

43,805

 

Exceeding 40000 kgs

38,308

41,561

A2

Goods Carrying Vehicles Private Carriers (other than 3 wheelers) 

 

GVW not exceeding 7500 kgs

7,144

8,438

 

Exceeding 7500 kgs but not exceeding 12000 kgs

15,620

17,204

 

Exceeding 12000 kgs but not exceeding 20000 kgs

9,871

10,876

 

Exceeding 20000 kgs but not exceeding 40000 kgs

15,397

17,476

 

Exceeding 40000 kgs

21,318

24,825

A3

Goods Carrying Motorized Three Wheelers and Motorized Pedal Cycles – Public Carriers

 

except e-carts

4,544

4,092

 

e-carts

3,175

2,859

A4

Goods Carrying Motorized Three Wheelers and Motorized Pedal Cycles – Private Carriers 

 

except e-carts

3,150

3,914

 

e-carts

2,579

3,204

B

Trailers 

 

Agricultural Tractors upto 6 HP

816

914               

 

Other vehicles including Miscellaneous & Special Type of Vehicles (Class-C),
(For each trailer, for more please multiply by no. of trailers)

2,091

2,341

*

A discount of 15%, on Motor TP premium rates for Electric Private Cars and Electric Two wheelers is proposed.

$

A discounted price of 50% of the proposed rate, based on the erstwhile Indian Motor Tariff (IMT), has been proposed for those private cars identified as Vintage Cars by the Vintage and Classic Car Club of India.

 

         

 


Table II

Category

Vehicle Type

Existing Rates (Rs.)

FY 2018-19

Proposed Rates (Rs.)

 FY 2019-20

Basic Rate

Per Licensed Passenger

Basic Rate

Per Licensed Passenger

C1a

Four wheeled vehicles used for carrying passengers for hire or reward with carrying capacity not exceeding 6 passengers

Not exceeding 1000 cc

5,437

1,046

5,769

1,110

Exceeding 1000 cc but not exceeding 1500 cc

7,147

880

7,584

934

Exceeding 1500 cc

9,472

1,006

10,051

1,067

C1b 

Three wheeled vehicles used for carrying passengers for hire or reward with carrying capacity not exceeding 6 passengers

except e-rickshaw

2,595

1,241

2,595

1,241

e-rickshaw

1,685

806

1,685

806

C2

Four or more wheeled vehicles used for carrying passengers with carrying capacity exceeding 6 passengers for hire or reward

School Bus#

13,176

805

13,874

848

Other Bus

13,176

805

14,685

897

C3

Motorized three wheeled passenger vehicles used for carrying passengers for hire or reward with carrying capacity exceeding 6 passengers but not exceeding 17 passengers

6,222

1,241

6,913

1,379

C2

Three wheeled passenger vehicles used for carrying passengers for hire or reward with carrying capacity exceeding 17 passengers

14,261

872

15,845

969

C4

Motorized Two wheelers used for carrying passengers for hire or reward

Not exceeding 75 cc

790

532

861

580

Exceeding 75 cc but not exceeding 150 cc

790

532

861

580

Exceeding 150 cc but not exceeding 350 cc

790

532

861

580

Exceeding 350 cc

2,067

532

2,254

580

#

 

School Busses are those buses which are registered in the name of the School and are used only for transporting students to or from a school or on school-related trips.

             

Table III

Category

Vehicle Type

Existing Rates

(Rs.)

FY 2018-19

Proposed Rates

(Rs.)

FY 2019-20

D

 

Special Types of Vehicles

i)   Pedestrian controlled Agricultural Tractors with Horse Power rating not exceeding 6HP, Hearses and Plane Loaders 

            1,435

1,607

ii) Other Misc & Spl types of vehicles

            6,115

6,847

E

Motor Trade (Road Transit Risks)

i)   Distance not exceeding 2400 kms

            1,088

1,055

ii) Distance exceeding 2400 kms

            1,308

1,268

F

Motor Trade (Road Risks) (Excluding Motorized Two Wheelers) – (Named Driver or Trade Certificate)

1st named driver or certificate

            1,296

1,345

For additional drivers/ certificates up to 5 (per driver/certificate)

                627

651

For additional Drivers/ Certificates exceeding 5 but not exceeding 10 (per driver/ certificate)

                404

419

For additional Drivers/ Certificates exceeding 10 but not exceeding 15 (per driver/ certificate)

                350

363

F

Motor Trade (Road Risks) (Motorized Two Wheelers) – (Named Driver or Trade Certificate)

1st named driver or certificate

530

515

For each additional Driver/ Certificate

264

257

 

 


 

Table IV

Long Term Premium rate table

Category of Vehicle

Existing Rates

(Rs.)

FY  2018-19

Proposed Rates (Rs.)

FY 2019-20

New Private Car – 3 Year Single Premium

Not exceeding 1000 cc

5,286

5,286

Exceeding 1000 cc but not exceeding 1500 cc

9,534

9,534

Exceeding 1500 cc

24,305

24,305

New Two Wheelers – 5 year Single Premium

Not exceeding 75 cc

1,045

1,045

Exceeding 75 cc but not exceeding 150 cc

3,285

3,285

Exceeding 150 cc but not exceeding 350 cc

5,453

5,453

Exceeding 350 cc

13,034

13,034

 

All stakeholders are invited to provide their comments on this exposure draft. The comments should reach the Authority, also by e-mail addressed to janita@irda.gov.in with a copy to srihari.a@irda.gov.in, on or before 29th May 2019.

                                                                            

                                                                                       (Yegnapriya Bharath)

                                                                   Chief General Manager (Non-Life)

 

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