Truck owners and operators have launched a nationwide indefinite strike, against high diesel prices and a sharp hike in third party insurance premiums. More than 90 Lakh trucks will not be on the roads during this indefinite strike. Diesel prices in Bengaluru were Rs 68.87/Litre and truck owners want diesel and petrol to be brought under GST.
Another important reason for this strike is the hike in third party liability insurance. Truck owners have requested IRDAI (Insurance Regulatory Development Authority of India) to detariff the third party insurance premiums, just like a comprehensive motor insurance plan. Detariff means pricing of goods and services at market value.
The IRDAI has revised third party liability insurance by 30% for the Financial Year 2018-19. What is third party liability? Why is it important? Why are the premiums of third party liability insurance going up? Let’s find the answers.
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What is third party liability insurance? In a third party motor insurance plan, there are 3 parties.
Third Party liability insurance is really simple. If your vehicle causes damage/injury/loss of life to a third party (unrelated party) and you get sued in a court of law for damage, bodily injury or death of the third party, the insurer compensates if you have third party liability insurance.
Still not able to understand? Well, if your vehicle meets with an accident and injures a person (third party) or damages his property, then the insurer pays for medical treatment and vehicle repair costs of the third party, if you have a third party liability insurance.
It is compulsory to avail third party liability insurance under the Motor Vehicles Act 1988. Third party liability doesn’t cover for the injuries you suffer in the accident or damage to your vehicle.
1. What is covered/not covered under third party liability insurance?
What’s not covered?
2. Why are premiums of third party liability for trucks going up?
Third party liability has been steadily increasing in the last 15 years. IRDAI has revised third party liability insurance by 30% for the Financial Year 2018-19.
Insurers have put a lot of pressure on IRDAI as there are a lot of accident claims for truck and commercial vehicle accidents. The methodology for calculation of proposed premium rates depends on accident costs of the previous years and also the category of the vehicles.
Truck operators are saying insurers are hiking third party liability insurance premiums to pay commissions to agents.
3. Why comprehensive auto insurance plans are a must?
A Comprehensive Auto Insurance Plan has 2 components.
Insurers have reduced own damage premiums by 5-20%. This is because of the Motor Insurance Service Providers (MISP) guidelines, which came into force from November 1st 2017. Guidelines have capped commissions or incentives paid to MISPs. So, insurers are giving discounts on own damage premiums.
Truck operators are availing third party liability insurance only because it’s compulsory. They view it as a burden and don’t understand its importance and many truck operators have not taken third party liability cover, even though its compulsory. Truck owners and operators should avail a comprehensive motor insurance plan where both third party liability and own damage is covered.
Insurers can also play their part. They can hike the No Claim Bonus for good/disciplined drivers who have not incurred third party claims. This will persuade truck owners to encourage disciplined driving by their drivers and save on third party insurance premiums. Be Wise, Get Rich.
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