News Non-Life03 Sep 2018

India:Multiple-year motor policies made available

03 Sep 2018

With effect from 1 September, general insurers have been required to offer only three-year motor third party insurance covers for new cars and five-year motor third party cover for new two-wheelers.

The move was made mandatory by an order issued in July by the Supreme Court. Last Friday, the court rejected a last-minute plea by general insurers for a delay in the implementation of the long term compulsory motor third party liability insurance policies.

The General Insurance Council, the official representative body of all general insurers in the country, had argued that the industry needed more time as a lot of groundwork needed to be completed and that in addition, state governments and regional transport offices all over the country should be in position to supervise the issuance of long-term policies at the time of registration of all new vehicles. The Council also pointed that the entire industry was currently busy settling claims arising from the Kerala floods which has triggered claims worth over INR10bn ($141m).

In a circular to insurers, the IRDAI said that after the introduction of long-term motor third party insurance, an insured should be given two options—long-term package cover offering both motor third party insurance and own damage insurance for three years or five years as the case may be or a bundled cover with a three or five year term for the third party cover and a one-year term for the own damage cover.

Earlier on 28 August, the insurance regulator had issued detailed procedures and pricing (only for the long term third party motor policy) under the new regime.

Mr Sanjeev Mantri, executive director, ICICI Lombard General Insurance, said, “The introduction of mandatory long term policies for new vehicles will go a long way in addressing the problem of under-insurance of motor vehicles. Today, as is widely estimated, around 60% of two- wheelers and 35-40% of four-wheelers are being driven on Indian roads without any motor insurance cover. With the launch of mandatory long term motor policies covering new two-wheeler and four-wheelers, we are sure that motor insurance penetration levels will rise further in the coming years.”

The Supreme Court's decision to make long term motor third party policies mandatory was prompted by the fact that most vehicle owners did not renew their motor third party liability insurance cover after the first year.


 

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