In a significant policy shift, the government proposed in Union Budget 2026 to link third-party (TP) motor insurance premiums to vehicle age. Currently, TP premiums are uniform regardless of whether a vehicle is new or over a decade old.
Proposed Framework: New vehicles (0–3 years) will attract lower TP premiums, while vehicles older than 10 years will face higher premiums. The move is aimed at better aligning premiums with actual risk—older vehicles tend to have higher claim frequency and severity. With over 30 crore registered vehicles in India, the reform is expected to rationalise the motor insurance pool and reduce cross-subsidisation.
Source: ET Now (January 30, 2026)