Page 27 - Insurance Times November 2021

Category of Vehicle Sub Category 2019-20
Premium
2002-03 2019-20 without
inflation could
have been
Four Wheeled Vehicles used for carrying passengers for hire
or reward - Capacity not exceeding 6 passengers Not Exceeding 1000 cc 285 1653 560
Exceeding 1000 cc but not exceeding 1500 cc 337 1754 594
Exceeding 1500 cc 375 2188 741
Three Wheeled Vehicles used for carrying passengers for
hire or reward - Capacity not exceeding 6 passengers Except e-rickshaw 233 1289 437
Motorised Three wheeled vehicles used for carrying
passengers for hire or reward - Capacity exceeding 6 but
not exceeding 17 671 3898 1320
Motorised Two Wheelers used for carrying passengers for
hire or reward Not Exceeding 75 cc 106 1064 360
Exceeding 75 cc but not exceeding 150 cc 124 1064 360
Exceeding 150 cc but not exceeding 350 cc 138 1064 360
Exceeding 350 cc 148 2093 709
Special type of vehicles Pedestrian controlled agricultural tractors with HP rating
not exceeding 6 HP, and Plane Loaders 62 199 67
Hearses 19 199 67
Other Miscellaneous and special type of vehicles 130 879 298
Average Rate 298 1754 591

The Cost Inflation Index 105 in 2002-03 will become 289 in 2019-20 at a rate of 6.5%. At a higher rate of 7.0% (0.5%
higher than 6.5%) it will become 310. The impact of inflation with this index of 310 will be as follows.

Average premium rate for 2019-20 is Rs 1754/-
Remove the hidden benefit of incidence reduction of 80% Rs 7016/-
(In the absence of incidence reduction premium should have been 1754*5/1=8770 and 80% of 8770 is 7016)
The premium for 2019-20 should have been Rs 8770/-

Remove the inflationary content (8770-(8770/310*105)) Rs 5799/-
The average premium (without inflation and without incidence benefit) Rs 2970/-

Inflation content of Rs 5799/- on original premium of Rs 298 works out to 19.46 times. Similarly the current premium
(without inflation and without incidence benefit) of Rs 2970/- compared with premium of Rs 298/- of 2002-03 works out
10 times (increase of 9 times). This represents the impact of factors other than incidence and inflation. (Since the premium
is per vehicle the increase in number of vehicles makes no
difference). Alternatively it can be worked out as follows.
Inflation Impact in Rs 1754 is Rs 1163 (1754-591 reflected
in table above). This impact of Rs 1163 is 19.38 times
incidence adjusted premium of Rs 60/-.

There is no specific design or bias in the selection of year
2002-03 as a beginning point of this analysis. It was driven
by the availability of Published Motor Tariff Booklet.
Similarly the last year of the period covered was driven by
the availability of published official accident statistics.
Choosing any other year as the beginning period of analyses
I do not think is likely to make any material difference either
for the analyses or for its conclusions. The analyses covers
the period during which public as well as private insurers
were in operation. T

The Insurance Times, November 2021 27