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ژوئن 3, 2022

3rd-party insurance premium hike for 2-wheelers may not impact demand: ICRA

The upward revision in the third-party insurance premium for two-wheelers, which has come into force from June 1, is unlikely to materially impact the demand, credit ratings agency ICRA said on Friday.

ICRA said it expects a 7-10 per cent year-on-year volume growth in the two-wheeler industry this fiscal, despite inflationary pressures and elongated semiconductors shortage due to the Russia-Ukraine war.

After a two-year moratorium due to the COVID-19 pandemic, third-party insurance premium rates have been hiked between 15-20 per cent for the premium category (more than 150 cc category).

However, the entry-level motorcycles and scooters (75 cc-150 cc), which accounts for 89 per cent in the overall two-wheeler volume, has been spared of any hike.

The increase in third party insurance premiums is, therefore, unlikely to materially impact the two-wheeler demand, ICRA said.

Moreover, given the fact that the less than 1 per cent increase in road price for the premium segment on account of the rate hike is also not significant, the rate hike is unlikely to have a major impact on consumer sentiments and comes as a relief for the industry, which has been grappling with muted demand, it stated.

Domestic two-wheeler industry volumes contracted for a third consecutive year in FY2022, with the consumer sentiments remaining muted. The cost of ownership of a two-wheeler has been steadily increasing over the years, thereby impacting affordability, said Rohan Kanwar Gupta, Vice President, Corporate Ratings, ICRA.

“Original equipment manufacturers (OEMs) have been forced to hike prices on account of multiple factors such as raw material hardening, transition to stringent emission norms and changes mandated by regulations, especially with regards to safety standards.

“In FY2022, even as there was no impact of regulatory notifications on prices, the OEMs had to pass on raw material hardening impact through multiple price hikes. As a result, enhanced cost of acquisition coupled with heightened crude prices have led to a significant increase in the cost of the ownership,” said Gupta.

Noting that aided by a recovery in rural sentiments post a healthy rabi harvest and pent up demand for festivals and weddings, wholesale volumes of motorcycles posed a recovery in April and May; ICRA said, reopening of education institutes and reversal in work-from-home trends in corporate India also supported the scooter offtake, thereby raising hopes of recovery in prospects of the two-wheeler industry.

As demand remains fragile, a further increase in the cost of acquisition could have constrained demand recovery for 2Ws in the near term, the ratings agency said, adding, the fact that the entry-level two-wheeler segment has been left out of the insurance price hike, comes as a relief for the industry.

Even as inflationary pressures and elongated semiconductor chip shortage due to the ongoing Russia-Ukraine conflict continue to remain headwinds for the industry, a broader vaccination coverage, reopening of education institutes and corporates; and expectations of normal monsoon, all coupled with a low base, are expected to drive a 7-10 per cent year-on-year volumes growth for the industry in FY2023.(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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مارس 5, 2022

Motor third-party premium rates to be revised after two years

The ministry of road transport and highways in consultation with the insurance regulator on Friday released a draft notification for revising the motor third party premium rates for the financial year 2023.

The proposed revision in motor third party premiums will take place after two years as the premium rates were not revised for FY21 and FY22 because of the pandemic.

According to the revised rates, private cars with 1,000 cubic capacity (cc) will attract rates of Rs 2,094. Similarly, private cars with 1,000 cc to 1,500 cc will attract rates of Rs 3,416 while above 1,500 cc private cars will see a premium of Rs 7,897. Two-wheelers over 150 cc but not exceeding 350 cc will attract a premium of Rs 1,366 and for two-wheelers over 350 cc the revised premium is Rs 2,804.

For public goods carrying commercial vehicles, the premium will range from Rs 16,049 to Rs 44,242 depending on the gross vehicle weight while for the private ones the premium will range from Rs 8,510 to Rs 25,038.

Further, the draft notification has proposed a 15 per cent discount for electric private cars, electric two wheelers, electric goods carrying commercial vehicles and electric passenger carrying vehicles. The proposed discount is expected to incentivise usage of environmentally friendly vehicles. Electric private cars will attract a premium of Rs 1,780 to Rs 6,712 depending on their capacity expressed in kilowatts. Similarly, two-wheeler electric vehicles will attract premiums in the range of Rs 457 to Rs 2,383. Further, hybrid electric vehicles will attract a discount of 7.5 per cent on the motor third party premiums.

The three-year single premium for new private cars and five-year single premium for new two-wheelers has also been revised and will attract premiums in the range of Rs 6,521 to Rs 24,596 and Rs 2,901 to Rs 15,117, respectively, depending on their cubic capacity.

The insurance executives are not very enthused with the proposed revision and termed it as a pro-policyholder move. The claims burden in the motor segment had gone down because of the pandemic but the increased claims on the health segment more than offset the dip in claims in the motor segment, an insurance executive said.

The insurance industry was expecting a decent increase from the regulator’s side after two years of no revision in premiums because there have been some court judgments, which have increased the claims severity on insurance companies.