I.R.D.A. (Insurance Regulatory & Development Authority) regulates, reviews & revises the Third Party Motor Insurance Premium Rates on yearly basis by exercising the powers vested in it under Section 14(2)(i) of the IRDA Act 1999 & are applicable from 1 April of every year.
I.R.D.A. specified the following formula to review the Third Party Motor Insurance Premium Rates on yearly basis in its notification dated 15 April, 2011 :
P(t) = C1(t) * CII (t-1) + C2(t)
P(t) is the Third Party Premium for the year t.
CII (t-1) is the C.I.I. (Cost Inflation Index) for the year (t-1) as notified by C.B.D.T. (Central Board of Direct Taxation).
C1(t) & C2(t) are parameters, for the year t, derived upon by average claim amount, claim frequency & expenses involved in providing services. It varies for different vehicle class.