Long-term Motor Insurance set-to-go- Makes Insurance Cheaper from August 1
The Insurance Regulatory and Development Authority of India (IRDAI) has recently announced the withdrawal of long-term third-party motor insurance packages with effect from August 01, 2020. This long-term motor insurance package included both ‘Motor Third Party’ and ‘Own Damage Insurances’ for 5 years on new two-wheelers and 3-years on new cars.
Supreme Court announced this long-term package was introduced on September 1, 2018. The long term implied 3-year motor third-party insurance for four-wheelers and a 5-year motor third-party for two-wheelers. In 2018, the Supreme Court ordered a mandatory 3-year and 5-year cover in view that to ensure that vehicles running on the Indian roads. The insurers then started providing long-term insurance products to the customers.
This included an option package of Own damage and third-party insurance policies on a long-term basis. The applicants had also started to complain about the premium since that Own damage prices are not regulated by the IRDAI and customers found the prices to be high.
This move will bring down the cost for consumers for first-year insurance for a new two-wheeler or four-wheeler. This move will also bring down the upfront cost for vehicle buyers, which is good news for consumers.
According to the IRDAI, the distribution of long-term third party motor insurance policies is challenging as it is too expensive for a lot of vehicle owners. It was increasing the burden on policyholders, and with no flexibility, it was increasing the chance of being linked to loans or forced selling.
There is no uniformity in the No-claim-bonus structure and this could lead to dissatisfaction and confusion amongst the policyholders. The insurers found the actual pricing to challenging for long term OD cover.
Earlier, IRDAI had asked the motor insurance companies to give customers an option to choose between one year and multi-year Own damage plans. Now, the insurers won’t give customers an option to buy Own damage covers on a long-term basis. The Own damage cover offers insurance cover against physical damages to the vehicle due to accidents, theft, and natural calamities.
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