Motor insurance deep dive

Cars and two-wheelers are personal lines. Commercial vehicles split into goods-carrying (GCV: trucks, pick-ups), passenger-carrying (PCV: taxis, buses) and miscellaneous (tractors, cranes, ambulances), each with its own rating class.

ExampleA delivery truck is a GCV, an app-based taxi is a PCV in class C1a, and a farm tractor is a miscellaneous vehicle.

OD pays for damage to or theft of your own vehicle. TP pays for injury, death or property damage you cause to others. Add-ons widen OD (zero depreciation, engine protection, return to invoice). Compulsory personal accident (CPA) cover pays ₹15 lakh if the owner-driver dies or is permanently disabled.

ExampleThe default car quote on the Calculators tab: OD ₹6,593, TP ₹3,416, CPA ₹330 and add-ons ₹2,282 (zero depreciation and roadside assistance).

Comprehensive 1+1 gives a year of both OD and TP. New vehicles must buy long-term TP, usually bundled with 1-year OD. Standalone OD is for owners whose long-term TP is still running. TP only meets the legal minimum.

ExampleA car bought in October 2024 came with a 1 OD + 3 TP policy. In October 2025 and 2026 the owner needs only standalone OD, because TP runs until October 2027.

New business is a new vehicle; rollover is moving from another insurer; renewal is staying with the same insurer; used vehicle is a second-hand purchase. Each needs different checks, such as previous policy details, NCB proof or an inspection.

ExampleA used car bought from a friend cannot carry over the friend's NCB, because NCB belongs to the owner, not the vehicle.

Age is counted in months. It drives both the depreciation used for IDV and the age band of the OD rate.

ExampleRegistered on 26 July 2024, policy starting on 26 October 2026: 27 months old.

The insured declared value (IDV) is the most the insurer pays for a total loss or theft. Depreciation by age: up to 6 months 5%, up to 1 year 15%, up to 2 years 20%, up to 3 years 30%, up to 4 years 40%, up to 5 years 50%. Older vehicles are valued by agreement.

ExampleEx-showroom ₹8,50,000 at 27 months: 30% depreciation gives an IDV of ₹5,95,000. The customer can choose anything from ₹5,05,750 to ₹6,84,250 without an underwriter referral.

The old Indian Motor Tariff gives a rate by zone (A for the eight largest cities, B elsewhere), engine size or power, and age. Since de-tariffing, each insurer offers a discount on that rate.

ExampleMumbai (zone A), 1,197 cc, 27 months: tariff rate 3.283%. With a 55% de-tariff discount the rate is 1.477%, so basic OD = ₹5,95,000 × 1.477% = ₹8,790.

Items not in the ex-showroom price are insured on top at their own rates. An external CNG kit is rated at 4% of its value; a factory-fitted kit adds 5% of basic OD. Loadings and discounts then apply to the subtotal.

ExampleAdding a ₹20,000 music system as an electrical accessory at 4% adds ₹800 to the OD premium.

Loadings raise OD for higher risk: fibre-glass fuel tank, driving-school use (+60%), imported without customs duty (+30%), geographical extension (₹400). Discounts lower it: voluntary deductible, ARAI-approved anti-theft device (2.5%, at most ₹500), automobile association membership (5%, at most ₹200).

ExampleSubtotal OD ₹8,790 with an approved anti-theft device: 2.5% is ₹220, below the ₹500 cap, so the discount is ₹220.

No claim bonus (NCB) rewards claim-free years and applies to OD only, never TP. It steps up after each claim-free year and goes back to zero after a claim.

ExampleOD before NCB ₹8,790 with 25% NCB: discount ₹2,198, leaving an OD premium of ₹6,593.

TP base premiums are fixed by engine size or motor power (see the table below). Small extras are added for a CNG or LPG kit, personal accident cover for passengers and legal liability to paid drivers. Restricting third-party property damage cover to ₹6,000 reduces TP (₹100 a year for a car).

ExampleA 1,197 cc car pays ₹3,416 TP. Adding legal liability for one paid driver makes it ₹3,466.

Each insurer prices its own add-ons, usually as a % of IDV or a flat fee. Net premium is OD + TP + CPA + add-ons. GST is 18% on all of it, except TP on goods carriages at 5%.

ExampleDefault car quote: net ₹12,620 + GST 18% ₹2,272 = total ₹14,892.

The rules engine sends a case to an underwriter when it falls outside the authority given to the channel, for example unusual values, extra discounts or high-risk vehicles.

ExampleA customer wants IDV ₹7,50,000 on a car with a system IDV of ₹5,95,000 (26% higher). The quote is referred, and the underwriter asks for the purchase invoice.

A pre-inspection proves the vehicle exists and is undamaged before cover starts. Most insurers now accept a self-recorded video through their app.

ExampleA policy lapsed 10 days ago. The owner records a walk-around video of the car in the insurer's app, it is approved, and the policy is issued.

NCB belongs to the owner. When the owner sells a vehicle, the insurer can issue a letter that lets the NCB be used on their next vehicle.

ExampleAn owner with 35% NCB sells a hatchback and buys an SUV. With the reserving letter, the SUV's first policy starts at 35% NCB.

The customer bears the first part of every OD claim. Choosing an extra voluntary deductible on top earns a premium discount.

ExampleA ₹25,000 repair on a 1,197 cc car: the customer pays ₹1,000 and the insurer ₹24,000, before any depreciation on parts.

Pay As You Drive prices OD by the kilometres driven. Pay How You Drive uses driving behaviour from a telematics device or app. Both let careful or occasional drivers pay less.

ExampleAn owner who drives 5,000 km a year buys a 5,000 km plan for a lower OD premium and tops it up if they drive more.

Electric vehicles are rated by motor power in kilowatts instead of engine cc, with lower TP premiums than petrol or diesel equivalents.

ExampleA 40 kW electric car pays ₹2,904 TP for a year, compared with ₹3,416 for a 1,197 cc petrol car.

The proposals aim to give new-car buyers real choice instead of the dealer's default insurer, and to stop garages refusing cashless repair because the policy was bought from a different channel.

ExampleAt the showroom, a buyer scans a QR code to compare policies from several insurers before deciding.

The Ministry of Road Transport and Highways notifies TP premiums after consulting IRDAI. Until a new notification is published, the 2022 rates apply.

ExampleA good system design keeps the 2022 rates with an end date and loads new rates with a start date, so policies starting before the change keep the old price.