icra: Third-party insurance premium hike for 2-wheelers unlikely to impact demand: ICRA

Third-party insurance premium hike for 2-wheelers unlikely to impact demand: ICRA

03 Jun , 2022 By : Divye Saini

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 NSE 2.51 % 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.