The aim is to allow a wider choice to customers looking to purchase insurance for their respective vehicle(s). This will allow all general insurers to provide offer 3-year insurance policy for private cars and 5-year for two-wheelers, both co-terminus with motor third party liability cover.
The premium for the entire term of the policy coverage would be collected at the time of the sale of the insurance cover. According to the draft, the pricing of the cover would be based on sound actuarial principles, including factors like claims experience, reduced policy administration and acquisition costs given higher renewal rates, long-term discount, expected NCB level by the end of the policy period and applicable government taxes etc.
The Supreme Court of India had made it mandatory for all cars and two-wheelers sold on or after September 1, 2019 to come with a mandatory third-party coverage of 5 years for two-wheelers and 3 years for four-wheelers. However, this was withdrawn in August 2020 due to concerns over its implementation.
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How it benefits you –
As a motor vehicle owner if you are in the market to purchase an insurance cover, the ‘Long-Term Motor Products covering both Motor Third Party Insurance and Own Damage Insurance’ would help you attain a peace of mind for a longer period, and will also likely be offered with discounts since you’re committing to the respective insurer for an extended time.
Moreover, IRDAI’s draft also says that the existing No Claim Bonus (NCB) grid as specified for the current one-year Motor Own Damage policies would also be applicable for the new long-term policies, and the NCB applicable at the end of the policy tenure in case of long-term policies would be same as that would have been earned if such policies were renewed annually.
“In case of long-term standalone Own Damage policies which are issued to be co-terminus with Motor Third Party Liability cover, 9-month of policy tenure can be considered as full year for recognition of NCB during the year,” read the statement. IRDAI has invited stakeholders to comment on the draft by December 22, 2022.
What if you have a change of mind after a short period?
The long-term motor Own Damage policy can be cancelled during the tenure of the policy either by the policyholder or by the insurer by giving the notice of cancellation. The refund of premium in such instance would be refunded in full for future year premiums. If no claims are reported during the year of policy cancellation, refund of pro-rata premium would be applicable. Do note that no refund of premium for the year would be provided if any claims are reported during that particular year.
What do you think about IRDAI’s new proposal on ‘Long-Term Motor Products covering both Motor Third Party Insurance and Own Damage Insurance’? Let us know in the comments down below.