Long-term own damage cover for motor vehicle insurance is withdrawn by IRDAI
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Published : Jul 20, 2023, 5:37 PM IST
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Updated : Sep 29, 2023, 4:16 PM IST
The Insurance Regulatory and Development Authority of India, better known as the IRDAI, brings regular changes in the way insurance policies work, intending to make insurance simpler and more transparent for the common people. To simplify motor/ auto insurance in the country, the apex body has brought some changes to the guidelines.
Article
The Insurance Regulatory and Development Authority of India, better known as the IRDAI, brings regular changes in the way insurance policies work, intending to make insurance simpler and more transparent for the common people. To simplify motor/ auto insurance in the country, the apex body has brought some changes to the guidelines.
What kind of motor insurance was available earlier?
As per the guidelines of the Supreme Court of India, it was ordered that a mandatory third-party cover has to be purchased for all vehicles sold after 1st September 2018. It was instructed by the IRDAI that all general insurance companies provide insurance seekers with two kinds of policies.
The customer would be allowed to purchase a long-term policy which could be three years for four-wheelers and five years of own damage coverage for two-wheelers
The second option also called bundled insurance comprised the mandatory third-party liability insurance with one year of own damage cover. Here, the customer had to renew the own damage on an annual basis.
Amendments from 1st August 2020
Post 1st August 2020, insurance providers would be providing own-damage coverage for one year alone. It should be noted that there has been no change in the mandatory 3-year third-party liability insurance for four-wheelers and 5-year third-party liability insurance for two-wheelers. Thus, in both scenarios, the own damage coverage would be co-terminus with the third-party liability coverage.
Here are the latest third-party liability insurance coverage rates for different types of vehicles:
Third-party premium for two-wheelers
Private cars with engine (cubic) capacity
Premium rate (with effect from June 1, 2022)
Not exceeding 75cc
₹538
Exceeding 75cc but not exceeding 150cc
₹714
Exceeding 150cc but not exceeding 350cc
₹1,366
Exceeding 350cc
₹2,804
5-year third party premium for two-wheelers
Private cars with engine (cubic) capacity
Premium rate (with effect from June 1, 2022)
Not exceeding 75cc
₹2,901
Exceeding 75cc but not exceeding 150cc
₹3,851
Exceeding 150cc but not exceeding 350cc
₹7,365
Exceeding 350cc
₹15,117
Third-party premium for four-wheelers
Private cars with engine (cubic) capacity
Premium rate (with effect from June 1, 2022)
Not exceeding 1000cc
₹2,094
Exceeding 1000cc but not exceeding 1500cc
₹3,416
Exceeding 1500cc
₹7,897
3-year third-party premium for four-wheelers
Private cars with engine (cubic) capacity
Premium rate (with effect from June 1, 2022)
Not exceeding 1000cc
₹6,521
Exceeding 1000cc but not exceeding 1500cc
₹10,640
Exceeding 1500cc
₹24,596
3-year third-party premium for electric four-wheelers (EVs)
Vehicle kilowatt capacity (KW)
Premium rate (with effect from June 1, 2022)
Not exceeding 30KW
₹5,543
Exceeding 30 KW but not exceeding 65 KW
₹9,044
Exceeding 65 KW
₹20,907
Why these amendments have been made?
The IRDAI has made these amendments to offer more flexibility to the motor insurance seekers. The Authority reviewed the options for annual and long-term coverage and after a careful examination, some concerns were highlighted. The IRDAI thus decided to withdraw the long-term own damage cover for motor vehicle insurance. Some of the highlighted concerns are listed below:
The actual pricing for long-term own damage cover has been a challenge
For a large section of vehicle owners, the prices of the package policies are rather high
Some incidents where the customers were force-sold the policies were reported
With a long-term commitment, if a customer is unsatisfied with the insurance company’s services, he/ she would be saddled with the product and have no flexibility to switch
The structure of NCB, no claim bonus, was not found to be very uniform and often led to uncertainty and dissatisfaction for the customer.
Conclusion
In case you have enrolled in long-term own-damage motor insurance, you have the option of canceling it. You would have to send a cancellation notice to your insurer. The refund would be initiated as per the applicable terms. If you have or are planning to purchase motor insurance after August 2020, in essence, there would not be any bearing on the premium prices. The decision to withdraw long-term own damage cover for motor vehicle insurance has been made to bring simplicity and clarity to motor insurance. (Advertisement)
The Insurance Regulatory and Development Authority of India, better known as the IRDAI, brings regular changes in the way insurance policies work, intending to make insurance simpler and more transparent for the common people. To simplify motor/ auto insurance in the country, the apex body has brought some changes to the guidelines.
What kind of motor insurance was available earlier?
As per the guidelines of the Supreme Court of India, it was ordered that a mandatory third-party cover has to be purchased for all vehicles sold after 1st September 2018. It was instructed by the IRDAI that all general insurance companies provide insurance seekers with two kinds of policies.
The customer would be allowed to purchase a long-term policy which could be three years for four-wheelers and five years of own damage coverage for two-wheelers
The second option also called bundled insurance comprised the mandatory third-party liability insurance with one year of own damage cover. Here, the customer had to renew the own damage on an annual basis.
Amendments from 1st August 2020
Post 1st August 2020, insurance providers would be providing own-damage coverage for one year alone. It should be noted that there has been no change in the mandatory 3-year third-party liability insurance for four-wheelers and 5-year third-party liability insurance for two-wheelers. Thus, in both scenarios, the own damage coverage would be co-terminus with the third-party liability coverage.
Here are the latest third-party liability insurance coverage rates for different types of vehicles:
Third-party premium for two-wheelers
Private cars with engine (cubic) capacity
Premium rate (with effect from June 1, 2022)
Not exceeding 75cc
₹538
Exceeding 75cc but not exceeding 150cc
₹714
Exceeding 150cc but not exceeding 350cc
₹1,366
Exceeding 350cc
₹2,804
5-year third party premium for two-wheelers
Private cars with engine (cubic) capacity
Premium rate (with effect from June 1, 2022)
Not exceeding 75cc
₹2,901
Exceeding 75cc but not exceeding 150cc
₹3,851
Exceeding 150cc but not exceeding 350cc
₹7,365
Exceeding 350cc
₹15,117
Third-party premium for four-wheelers
Private cars with engine (cubic) capacity
Premium rate (with effect from June 1, 2022)
Not exceeding 1000cc
₹2,094
Exceeding 1000cc but not exceeding 1500cc
₹3,416
Exceeding 1500cc
₹7,897
3-year third-party premium for four-wheelers
Private cars with engine (cubic) capacity
Premium rate (with effect from June 1, 2022)
Not exceeding 1000cc
₹6,521
Exceeding 1000cc but not exceeding 1500cc
₹10,640
Exceeding 1500cc
₹24,596
3-year third-party premium for electric four-wheelers (EVs)
Vehicle kilowatt capacity (KW)
Premium rate (with effect from June 1, 2022)
Not exceeding 30KW
₹5,543
Exceeding 30 KW but not exceeding 65 KW
₹9,044
Exceeding 65 KW
₹20,907
Why these amendments have been made?
The IRDAI has made these amendments to offer more flexibility to the motor insurance seekers. The Authority reviewed the options for annual and long-term coverage and after a careful examination, some concerns were highlighted. The IRDAI thus decided to withdraw the long-term own damage cover for motor vehicle insurance. Some of the highlighted concerns are listed below:
The actual pricing for long-term own damage cover has been a challenge
For a large section of vehicle owners, the prices of the package policies are rather high
Some incidents where the customers were force-sold the policies were reported
With a long-term commitment, if a customer is unsatisfied with the insurance company’s services, he/ she would be saddled with the product and have no flexibility to switch
The structure of NCB, no claim bonus, was not found to be very uniform and often led to uncertainty and dissatisfaction for the customer.
Conclusion
In case you have enrolled in long-term own-damage motor insurance, you have the option of canceling it. You would have to send a cancellation notice to your insurer. The refund would be initiated as per the applicable terms. If you have or are planning to purchase motor insurance after August 2020, in essence, there would not be any bearing on the premium prices. The decision to withdraw long-term own damage cover for motor vehicle insurance has been made to bring simplicity and clarity to motor insurance. (Advertisement)
