The Insurance Regulatory and Development Authority of India (IRDAI) has brought out the new set of premium rates for the third-party (TP) motor segment. Electric vehicle (EV) motor TP premiums are cheaper than those for regular vehicles. At a time when an insurance price increase is a factor for a dip in auto sales, cheaper TP rates would mean a direct impact on the buying behaviour.
The government has been looking to incentivise sales of electric vehicles (EV). Further, a report also suggests that the Ministry of Road Transport and Highways has started working on a draft notification proposing the sale of only electric three-wheelers from April 2023 and sale of only electric two-wheelers under 150cc from April 2025 onwards.
Motor TP insurance is mandatory for all vehicles running on Indian roads. This pays for third-party accidents where a car/bike is involved. If a vehicle injures or kills a passenger in another vehicle or a pedestrian, the insurance company pays the damages to the deceased’s family.
The premium rates for EVs are 15 percent cheaper than that of regular vehicles. While there are minimal claims in this segment due to lower penetration, EVs are considered more eco-friendly than the petrol/diesel options.
The own-damage motor covers are also priced cheaper for EVs than the regular vehicles. Insurance companies take past claims into account, type of vehicle and engine-capacity for deciding the policy rates.
Further, a Niti Aayog report said that there could be a sales penetration of EVs to the tune of 30 percent in private cars and 80 percent in two/three-wheelers by 2030. It is anticipated that this would be aided by cheaper vehicles and allied costs with the purchase.
The Supreme Court made it mandatory for all new cars and bikes to have three-year and five-year TP cover from September 1, 2018. This led to an immediate jump in the insurance premiums (by 1.5-2.3X), thereby impacting overall vehicle sales.
With more number of people buying EVs, it would mean an automatic increase in the insurance claims from this segment. However, the numbers are still expected to be much lower than the petrol/diesel cars and bikes.
Lower motor insurance may not be the only reason to choose EVs over the regular vehicles. But, this is certainly an additional incentive to go green and minimise air pollution.