Now the two-wheeler owners can also opt for the third party motor insurance for a term of 3 years. This initiative by Insurance Regulatory and Development Authority (IRDA) will allow the owners to get their vehicle insured for 3 years instead of getting stuck in the hassle of yearly renewals. IRDA is open to similar plans with own damage option as well.
According to a circular by IRDA, 3 year third party insurance is expected to have thrice the annual third party premium for two-wheeler vehicle. Irrespective of the circumstance, the premium will not be revised during the policy period. The premium needs to be paid in one installment subjected to the fulfillment of section 64VB of the Insurance Act 1938.
Except in the case where the vehicle is considered to be a total loss, insurer cannot cancel the standalone third-party cover. In case of total loss, it is mandatory for the insurer to refund the premiums to the customer for the full unexpired years.
If offering three years cover, the insurer is required to submit a letter of intent to IRDA. This will be considered as the submission under file and use guidelines of the regulator. As per the IRDA note- the regulator understands the need of a long-term comprehensive cover. It is happy to welcome 3 year comprehensive policy for two wheelers as per the file-and- use guidelines.
Third party insurance is mandatory under the motor insurance law for covering liability of third party. Insurers believe the 3 year tenure will subsequently decreases the cost like issuing policies, administering them and follow-ups for renewals. The savings done by the insurer could get passed over to the customer in the form of lower premium. The non-life insurers do not make any loss in the low-ticket sized two-wheeler insurance.
Under the Motor Vehicle Act, third party insurance is mandatory for every vehicle that plies on the road. IRDA in April has increased the third party cover for car, commercial vehicles and two –wheelers. For finalizing the third-party motor insurance premium in April this year, Insurance Information Bureau has provided data of underwriting years 2007-008 to 2012-13 for number of claims reported and cleared, number of policies up to March 31, 2013.
For calculation of third party liability, IRDA had created a formula that computes the pricing annually on the following factors-age of deceased, wages, earning capacity etc.
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