The Insurance Regulatory and Development Authority of India (IRDAI) has clarified that long-term third party motor insurance policy will be applicable only for new private cars and two-wheelers. According to IRDAI clarification, existing vehicles will get only one year insurance cover on renewal while new private cars will have to compulsorily go for three-year policies. Similarly, new two-wheelers will have to get compulsory five-year policy.
In compliance with a Supreme Court directive in 2018, IRDAI had issued a circular mandating the issuance of long term motor third party cover for two-wheelers and private cars. As per its circular issued on July 11, 2019, the authority has clarified that such long term products will apply only to new private cars and new two wheelers and will not be offered for renewal of existing policies or for old vehicles. Hence, owners of old vehicles can continue to renew their policies on an annual basis, Subramanyam Brahmajosyula, head – underwriting & reinsurance, SBI General Insurance, said.
When the Supreme Court took up the matter of long-term policy for new vehicles last year, the General Insurance Council had argued that the industry needed more time as a lot of ground work needed to be completed apart from the fact that the state governments and Regional Transport Offices all over the country should be in position to supervise the issuance of long-term policies at the time of registrations of all new vehicles. Under a motor insurance policy, there are two major components: Third-party insurance and Own Damage Insurance. As per The Motor Vehicles Act, 1988, it is mandatory to insure vehicles with at least third-party insurance cover. OD covers loss or damage to the vehicle insured due to accident including fire and theft. Third party covers any damage or injury caused by the insured, to another person or property.
Last month, IRDAI had asked general insurers to make available stand-alone annual Own Damage (OD) covers (including stand-alone OD cover for fire or theft if opted for by the policyholder) for cars and two-wheelers.
The new regulation will be applicable for both new and old vehicles. Consequently, with effect from September 1, 2019, the issuance of bundled policies for cars and two-wheelers will not be compulsory. Owners can buy OD and third party policies separately. Further, insurers will have the option to offer package policies, in addition to stand-alone OD and third party (TP) policies. Long term stand-alone OD policy will not be permitted for the present.
For issuance of stand-alone Own Damage annual cover as well as for renewal of Own Damage component of a bundled cover, insurers will have to ensure that OD cover is offered only if a motor TP cover is already in existence or is taken simultaneously. The name of the insurer, policy number and the start date and end date of the TP policy should be indicated in the OD policy document.