In an exposure draft released on the 7th of December, the IRDA proposed to permit all General Insurers to allow coverage of motor policies for private cars & two wheelers upto 3 & 5 years respectively.
Such long-term policies, if permitted by the customer, should expire on the same date as the existing third-party policy, as specified in the draft guidelines.
It is pertinent to note that IRDA had already allowed for long-term third-party cover for two wheelers and private cars, albeit new ones, from the 01st of September 2018.
These vehicle classes were given the option of a long-term comprehensive package coverage (Own Damage + Third Party Liability) or a combination of a long-term third-party liability policy and an annual own damage policy.
In August 2020 however, based on concerns arising out of policyholder sentiment of being stuck with Insurers, despite deficient service, the regulator asked for the withdrawal of long-term comprehensive package cover.
The draft released last week has also proposed a 3-year cover for miscellaneous vehicles as listed under Class D vehicles in the Indian Motor Tariff.
What’s on this page?
Here’s a look at some of the pertinent facts as proposed by the regulator:
- If implemented, these three classes of vehicles would have a wide array of covers to choose from, including a comprehensive long term cover, or a combination of a long term cover with an annual own damage cover.
- The regulator has also specified the method for the calculation of depreciation of value under the Insured Declared Value(IDV). IDV forms the basis of all calculations under the motor policy. Depreciation cannot exceed 10% on an annual basis is what the draft proposes.
- Policies would be given a free look-up of about 30 days from the date of start of coverage and a pro-rata refund if the Insured chose to cancel the policy between this period.
Refund of premium would be on pro-rata for the year wherein the cancellation is exercised, but full for the balance years i.e. say you decide to cancel your two wheeler policy in the 6th month, you would be refunded half of the premium for the first year, and the entire premium for the second and the third year, subject to no claims under the policy.
No refund of the premium would be allowed if there is a claim under the policy.
- The treatment of the No Claims Bonus for long-term policies would be the same as carried out under annual policies.
- Guidelines for the cancellation of policies remain the same.
Motor insurance remains one of the most bleeding industries in the country. With small steps like these, we could set off a chain reaction that could not only increase penetration but also make the portfolio viable.