Third-Party Premiums Drive Shift In Motor Insurance Growth As Insured Base Widens

Growth in third-party (TP) motor insurance premiums overtook own-damage (OD) premiums in FY26, reversing the recent pattern of OD-led expansion. TP premiums rose about 9.3 per cent in FY26, while OD grew roughly nine per cent, lifting overall motor-insurance growth to nearly nine per cent on an estimated market base of Rs 1.08 lakh crore. This marks a change from FY24, when OD surged by around 17.4 per cent and TP expanded by close to 10 per cent, and from FY25, when OD increased by 8.1 per cent and TP by 7.8 per cent.

Drivers Behind The TP Pickup

The main factor behind the TP gain is tougher enforcement and rising renewal compliance. Third-party cover is mandatory, and authorities across multiple states have stepped up checks using digital verification linked to vehicle registries. Penalties for non-compliance, including fines and, in repeat cases, possible imprisonment, are being applied more consistently. Industry estimates suggest that as many as 40–45 per cent of vehicles were previously uninsured, which provides a large pool of potential new TP policies now being brought into the system through focused compliance drives, according to a recent report by The Economic Times.

TP growth benefits from both new-vehicle sales and improved renewals among existing owners, so it is less dependent on fresh demand than OD. In contrast, OD volumes and premiums are more closely tied to new-car sales cycles because OD typically comprises a larger share of premiums for private cars, roughly 80 per cent. With new-vehicle sales remaining relatively subdued, OD growth moderated, allowing TP to edge ahead despite no change in regulated TP premium rates since the pandemic.

How Changing Vehicle Mix Influences OD Pricing

The evolving automobile market is also reshaping OD pricing dynamics. The combined market share of a few established manufacturers has declined in recent years as newer players have gained ground. Vehicles from several newer manufacturers often have lower repair and spare-part costs, enabling insurers to price OD cover more competitively. This shift in model mix has acted as a headwind for OD premium growth, even as insurers adjust pricing models to reflect lower average repair costs and varied risk profiles across vehicles.

Data Snapshot And What It Means

The FY26 picture shows a motor market of about Rs 1.08 lakh crore and overall growth close to 9 per cent, with TP at roughly 9.3 per cent and OD at about nine per cent. Tighter enforcement, routine digital verification against vehicle records, and better renewal behaviour are behind the shift. For vehicle owners, stepped-up checks mean a higher chance of needing to keep third-party cover current and of being fined if found uninsured, while online verification makes proving cover easier. Insurers stand to gain from a larger pool of policyholders and new premium revenue, even as OD margins remain sensitive to repair-cost trends and the evolving mix of cars on the road.

In FY26, the market showed a modest but notable shift toward TP-led growth, largely fuelled by tougher enforcement and better compliance rather than changes to regulated TP rates.