Long Term Comprehensive Policy for Two- Wheelers will be Costly

The inclusion of third party motor damage and own motor damage in the comprehensive insurance policy for two wheelers will make it an expensive affair with premiums set to rise by 2.5 times on an annual basis. Insurance Regulatory and Development Authority of India (IRDA) introduced long term comprehensive policy for two wheelers during the second half of 2014 and making it mandatory for two wheeler owners to have third party insurance as a component in their insurance coverage.

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Three year comprehensive insurance plan is considered beneficial for insurance seekers as it eliminates the need of renewal every year which also means that they cannot change the amount of insurance premium as there is a lock in period. Pricing is the most important criteria for an insurance seeker and is a decision influencer regarding selection of a plan. With addition of compulsory coverage’s, premium is all set to rise by 2.5 times higher than normal insurance premium plan for one year term. Hence, all future plans are set to become expensive as insurers will take claims, historical data and inflation into consideration while pricing the product.

Third party insurance is regulated by IRDA in India and regulatory is responsible for any revision in rates. The regulatory body is responsible for analyzing trends every year and basis several factors including claim rates; it changes or revises the premium rates of the insurance. The Authority further emphasized the importance of third party coverage as it said that the total premium charged for the three year lock in period will be thrice the annual premium charged for the same policy for one year. It is also expected that regulatory body will extend same policy guidelines for four wheelers too. The pricing model will remain same.

Regulatory body also provided future insight of the motor insurance plans. They added that there is a requirement of long term third party coverage including own damages and third party damages. It will help to meet and cover every possible risk as own party damages provide for losses to self during accidents while third party damages cover losses to third party caused by the owner of the vehicle.

The regulatory body aims to increase the penetration of the insurance by reducing uninsured vehicles on the road. New India Assurance, one of the largest general insurance companies in India, has already received consent from the body to issue long term comprehensive policy for two wheelers with minimum lock in period of three years. The insurer is expected to launch the product in this segment in coming weeks with premiums being calculated on the basis of guidelines set by the regulatory body which is expected to be around three times higher than the policy for one year.

(Source: This article has been adapted from the article "Long-term comprehensive policy for two-wheelers to be an expensive affair" that appeared on February 11, 2015 in business-standard.com)

Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.

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^The renewal of insurance policy is subject to our operations not being impacted by a system failure or force majeure event or for reasons beyond our control. Actual time for a transaction may vary subject to additional data requirements and operational processes.

^The buying of Insurance policy is subject to our operations not being impacted by a system failure or force majeure event or for reasons beyond our control. Actual time for transaction may vary subject to additional data requirements and operational processes.

#Savings are based on the comparison between highest and the lowest premium for own damage cover (excluding add-on covers) provided by different insurance companies for the same vehicle with the same IDV and same NCB.

*TP price for less than 75 CC two-wheelers. All savings are provided by insurers as per IRDAI-approved insurance plan. Standard T&C apply.

*Rs 538/- per annum is the price for third party motor insurance for two wheelers of not more than 75cc (non-commercial and non-electric)

#Savings are based on the comparison between the highest and the lowest premium for own damage cover (excluding add-on covers) provided by different insurance companies for the same vehicle with the same IDV and same NCB.

*₹ 1.5 is the Comprehensive premium for a 2015 TVS XL Super 70cc, MH02(Mumbai) RTO with an IDV of ₹5,895 and NCB at 50%.

*Rs 457/- per annum (1.3/day) is the price for the third-party motor insurance for private electric two-wheelers of not more than 3KW (non-commercial). Premium is payable on an annual basis