Why Car Insurance Premiums Vary Across Regions

What are the Insurance Zones in India

In India, motor insurance premiums are categorised into Zone A and Zone B, as defined by the Insurance Regulatory and Development Authority of India (IRDAI).

• Zone A includes metropolitan cities like Mumbai, Delhi, Chennai, Bengaluru, Kolkata, Hyderabad, Ahmedabad and Pune.
• Zone B includes all other cities, towns and rural areas.

These zones are created to categorise risk levels based on urbanisation, traffic congestion, accident statistics and theft rates.
 

How Is Insurance Premium Calculated for These Zones?

The Own Damage (OD) premium component of your insurance is calculated as a percentage of your car’s Insured Declared Value (IDV). This percentage varies depending on the zone, engine capacity and age of the vehicle.

Zone A – IRDAI OD Premium Rates

Vehicle Age	≤ 1000 cc	1000–1500 cc	>1500 cc
Up to 5 years	3.127% of IDV	3.283% of IDV	3.440% of IDV
5 – 10 years	3.283% of IDV	3.447% of IDV	3.612% of IDV
Over 10 years	3.362% of IDV	3.529% of IDV	3.698% of IDV

 

Zone B – IRDAI OD Premium Rates

Vehicle Age	≤ 1000 cc	1000–1500 cc	>1500 cc
Up to 5 years	3.039% of IDV	3.191% of IDV	3.343% of IDV
5 – 10 years	3.191% of IDV	3.351% of IDV	3.510% of IDV
Over 10 years	3.267% of IDV	3.430% of IDV	3.594% of IDV

These rates are defined under the IRDAI’s India Motor Tariff and show that Zone A premiums are typically 10–15% higher than Zone B due to higher repair costs, accident rates and claim frequency.

Third-party premiums are set annually by IRDAI based on engine capacity and remain constant across both zones.
 

Why Does Car Insurance Premium Change According to Insurance Zones?

The main reason why car insurance premiums change by region is the difference in accident risk.

Metropolitan cities (typically categorised under Zone A) experience more traffic congestion, higher chances of road accidents, and greater claim frequency. Because of this, insurance premiums in these areas are higher compared to Zone B regions, which include smaller towns and rural areas with lower risk.

Insurers use this zoning to calculate risk and adjust OD premiums accordingly.
 

What Are the Other Factors Influencing Car Insurance Premiums

Besides zone classification, these additional variables affect what you pay:

1. Insured Declared Value (IDV)

IDV is the market value of your car, and OD premium is calculated as a percentage of this. It decreases over time due to depreciation.

2. Engine capacity, vehicle class, and fuel type

Your premium rate is calculated based on the cubic capacity of your car engine and applied to your IDV. Cars are grouped into:

• Up to 1000cc
• 1000–1500cc
• Above 1500cc

If your car is used for personal purposes, it falls under the private car category. Whether it’s a hatchback, sedan, or SUV, the premium structure remains the same within this class. However, commercial vehicles (like taxis, goods carriers, or school vans) belong to different vehicle classes and follow separate premium charts.

If you drive an electric car, you get a 15% discount on third-party premium, as per IRDAI’s green vehicle policy.

4. Add-ons

Covers like Zero Depreciation, Engine Protect, etc., increase the premium.

5. Claim history

Frequent claims can remove your No Claim Bonus, resulting in a higher premium next year.

These, combined with zone logic, explain why Car Insurance varies by state and individual policyholder.
 

How Can You Save on Car Insurance Premiums?

Even if you're in a high-premium zone, you can reduce costs:

• Compare quotes online before renewing.
• Install anti-theft devices approved by ARAI.
• Opt for voluntary deductibles to reduce your OD premium.
• Avoid small claims to protect your No Claim Bonus.
• Choose add-ons wisely, based on actual usage.

Understanding regional differences in Car Insurance rates helps you optimise your expenses better.
 

Conclusion

Where you live has a direct impact on your Car Insurance premium. If you reside in a Zone A area, your car insurance premium will be higher than if you reside in a Zone B area. However, with the right awareness and choices, you can manage costs smartly and still stay fully protected.

That’s where Shriram Car Insurance comes in. Whether you’re in a high-risk metro or a quiet town, we provide:

• Affordable premiums
• Customisable policies with add-ons like Zero Depreciation, Engine Protection, and more
• Hassle-free claim settlement
• Pan-India cashless garage network
• And dedicated support throughout your policy term

No matter where you live, you deserve a policy that puts you first. With Shriram Car Insurance, you get value and coverage, all in one place.
 

FAQs

1. Can I change my Car Insurance zone by updating my address?

Yes, your registered address determines the zone. Updating your RC can shift your zone.

 

2. Why is my premium higher than my friend’s for the same car?

Different zones, IDV, or claim history may cause the variation.

 

3. Are zone rates the same for all car types?

Yes, the structure applies across vehicle segments.

 

4. Do Third-party premiums vary by zone?

No, third-party premiums are fixed nationwide by IRDAI.

 

5. Which cities are in Zone A?

Mumbai, Delhi, Chennai, Bengaluru, Hyderabad, Kolkata, Ahmedabad, and Pune.