Motor Third-Party (Tariff)
The one price IRDAI still fixes — a structurally loss-making line every general insurer is obliged to write.
Why you care
Almost every price in Indian insurance is now free — except this one. Motor third-party cover is mandatory for every vehicle, and IRDAI still sets its price. Because that price has historically lagged the claims it has to cover, every general insurer carries a chunk of business it's obliged to write and expects to lose money on.
Run the numbers
An insurer must offer motor TP. If the fixed premium collects ₹100 while court-awarded injury and death claims cost ₹120, the line runs a 120% loss ratio (illustrative). It can't reprice — the tariff is set — so the loss is baked in and drags the whole loss ratio up.
Where this goes
Motor TP is a mandated overshoot on the loss ratio: a line the insurer can't refuse and can't reprice. Spread across the industry, it's one reason the general-insurance combined ratio sits stubbornly near or above 100%.
Why you care
Motor third-party (TP) insurance covers an insurer's liability for injury, death, or damage caused to other people by the insured vehicle. It is compulsory for every vehicle on an Indian road, and it is the one major line where IRDAI still fixes the price by tariff rather than letting insurers set it. That combination — mandatory to sell, price you can't control — is what makes it unusual.
Most of Indian general insurance was detariffed years ago; insurers compete freely on price for motor own-damage, health, property, and the rest. Motor TP is the holdout. IRDAI notifies the premium. And because third-party claims are decided by courts, which can award large, rising sums for death and disability, the claims cost has a habit of running ahead of the administered price. The result is a line that is structurally loss-making for the industry: insurers are legally required to provide it, cannot walk away from it, and cannot reprice it to cover its own claims. For a reader trying to understand why Indian general insurers struggle to get their combined ratios below 100%, motor TP is a large part of the answer. It's a permanent, mandated weight on the loss ratio.
Run the numbers
Take the motor TP slice of an insurer's book. Suppose the tariff lets it collect ₹100 of premium on a set of policies, but the eventual court-awarded claims on those policies come to ₹120:
| Amount | |
|---|---|
| TP premium (tariff-set) | ₹100 |
| TP claims (court-awarded) | ₹120 |
| Loss ratio on the line | 120% |
That's a 20% underwriting loss on the line before a rupee of expenses (illustrative). A normal insurer would respond by raising the price — but it can't, because the price is fixed, and it can't stop selling, because the cover is compulsory. So the loss is structural. Insurers manage it at the edges (selecting vehicle types, leaning on the more profitable own-damage cover sold alongside), but the TP drag remains. Motor TP is the clearest example in the whole map of the regulator's grip showing up directly in an operating number. It's a line the market can't price its way out of, sitting inside every general insurer's loss ratio.
Where this goes
Motor TP feeds the loss ratio as a mandated overshoot: a chunk of business the insurer must write at a price it doesn't set, on claims it can't control. Aggregated across the industry, that structural loss is one of the reasons the general-insurance combined ratio sits near or above 100% year after year. It's also why so many Indian general insurers depend on the investment float to turn a profit. It is the single sharpest illustration of the regulator's grip landing directly on the underwriting result.