Costly, but hassle-free ride
Experts believe although the new motor insurance guidelines, effective from September 1, will cost you more in the beginning, overall, the expense remains same and it’s hasslefree
MUMBAI: After the Insurance Regulatory Development Authority of India (IRDAI) mandated a long-term third party motor insurance—three years cover for fourwheeler vehicles and five years cover for two-wheelers from September 1—the regulator has come out with pricing guidelines.
THE COST
If you buy a two-wheeler or four-wheeler vehicle from September 1, you have to take an insurance cover for five years or three years, respectively. The regulator has also listed the premium cost for each kind of vehicles. For instance, for private cars with less than 1,000cc engine capacity, the premium for third party liability insurance will be ₹5,286 for a three-yeartenure as compared to ₹1,850 for a oneyear-period currently.
Similarly for cars with engine capacity of more than 1,500cc, the premium on third party liability insurance will be ₹24,305 for a three-year-period from September 1 as compared to ₹7,890 for a oneyear-period.
This indicates that as a buyer, you will have to shell out more initially as you will be paying for a longer-term insurance cover. For existing vehicle owners, a cover under the new regulations will be offered at the time of renewal.
“For customers, the cost of ownership of the vehicle may go up by 4-5%. However, considering the comprehensive covers, there will be lesser hassle for annual renewal and other such benefits, the new rule should not impact them much,” said Puneet Sahni, product development head at SBI General Insurance Co. Ltd.
The regulator’s circular also clearly lays out the rules for cancellation of third party insurance.
It says that no third party motor insurance can be cancelled either by the insurer or the insured. This means you as a consumer, you can’t cancel the cover.
However, this rule can be exempted on three grounds — if there is a situation of double insurance, if the vehicle is not in use anymore because of total loss or total constructive loss, and if the vehicle is being sold or transferred.
UNDERWRITING PRINCIPLE
For insurers, IRDA has given three options for long-term insurance.
“The insurer can offer a long-term third party policy—premiums for which have been decided and provided by the Third party liability premium before Sept 1 Third party liability premium after Sept 1
Less than Between
and
Above
The cost of ownership of the vehicle may go up by 45%. Considering the comprehensive covers, lesser hassles for renewal and other benefits, the new rule shouldn’t impact them. PUNEET SAHNI, product development head at SBI General Insurance Co. Ltd
regulator along with the circular, design long-term comprehensive covers for the three-and-five-year-versions for which the regulator has given time till September 15, or bundle their own damage cover and third party cover for a three-year-orfive-year tenure,” said Sahni.
Sanjay Datta, chief of underwriting and claims at ICICI Lombard General Insurance said, “The regulator has laid out a tariff for three-and-five-year third party insurances in the new circular. There will also be no renewal for the third party cover; renewal will only be for the own damage cover.”
One implementation hurdle with regards to two-wheelers that the insurer might face is the small ticket size of two wheelers.
“Distributors may not find it remunerative enough to get insurance plans renewed for two-wheelers leading to a
small ticket size,” said Datta.
WHAT IT MEANS FOR YOU
For those buying cars from September 1, though you have to shell out more initially, the overall cost will remain almost the same in the long run. The change in policy also means you don’t have to go through the annual renewal process every year as your vehicle will be covered for a longer period.