New motor insurance rule! Car, bike owners given more choice to buy insurance

New motor insurance rule! Car, bike owners given more choice to buy insurance
24 Jun 2019

While the third-party insurance cover continues to be a mandatory cover, from September 1, 2019, car and bike policyholders will have 3 options to get their vehicles insured.

New motor insurance rule from IRDAI gives car, bike owners more choice to buy a cover for their vehicles.

Almost a year back, the Insurance Regulatory and Development Authority of India (IRDAI) had asked insurance companies to offer long-term insurance policies for new cars and two-wheelers purchased on or after September 1, 2018. Effective September 1, 2019, the guidelines are being relaxed by the regulator. “Till now the customer had to buy the Own Damage (OD) component along with the Third Party component in the form of a comprehensive policy from the same insurer. Now one can take OD only policy from any of the general insurance companies in the market,” informs Sajja Praveen Chowdary, Head- Motor Insurance,

The latest IRDAI circular states that – “Effective, 1st September, 2019, insurers shall make available stand-alone annual Own Damage covers if opted for by the policyholder for Cars and Two-wheelers, both new and old. Consequently, effective 1st September, 2019, the issuance of bundled policies for cars and two-wheelers will not be compulsory. Further, insurers will have the option to offer Package policies, in addition to stand-alone OD and TP policies. Long term stand-alone Own Damage policy will not be permitted for the present.”

But, what if you have already purchased the plan and now want to renew the OD component of a bundled cover from some other insurer. It is possible now but only after September 1, 2019 as from then it will be allowed with the same insurer or different insurer, on an annual basis. “This is very much beneficial for the customers who already have a bundled policy (the TP component existing for 3 years in car / 5years in bikes) from the perspective that it gives customers a fair chance and options to choose from and can now opt for the OD only policy from any of the insurer,” says Chowdary.

While the third-party (TP) insurance cover continues to be a mandatory cover, from September 1, 2019, these 3 options will be available to the car and bike policyholders:

1. Multi-Year Long Term Comprehensive Policy

Under a  Long Term, Comprehensive Policy both TP and OD coverage is for  3 or 5 years ( 3+3) or (5+5) for cars and two-wheelers respectively. Here the premium is also collected for  3 or 5 years and policy renewal will come into question only after 3 or 5 years when the policy is about to expire.

2. Bundled Policy

But, what if one wants to pay OD premium only for one year and renew it the next year onwards? In that case, one can opt for a Bundled Policy, wherein, “The TP coverage is of 3 or 5 years but the OD cover is applicable for 1 year only i.e. (1+3) or (1+ 5) for cars and two-wheelers respectively. Here, the OD premium will have to be renewed every year as compared to a TP cover which is possible for renewal only after 3 or 5 yrs. The policy, however, is from the same insurer.

3. Standalone OD cover

Now, IRDAI has allowed to getting the OD cover from any insurer. “The bundled policy (3+3) and (5+5) seemed a costly affair to the customer, therefore, majority of the customer base opted for (1+3) or (1+5) option but, the clarity on renewing the Own Damage policy was not there. With the new regulation ringing in, they can now buy the OD component separately and also have the choice to buy from a different insurer as well providing the customer submits the valid TP policy documents and details,” says Chowdary.

However, for issuance of stand-alone Own Damage annual cover as well as for renewal of the Own Damage component of a bundled cover, it will be offered only if a Motor TP cover is already in existence or is taken simultaneously. To ensure its compliance, the OD policy document needs to carry the name of the insurer, policy number and the start date and end date of the TP policy.