The insurance regulator IRDAI has asked all general insurance companies to design long-term motor third party liability products--with a term of five years for two-wheelers and three years for cars--so as to increase the number of vehicles with this mandatory cover.
The move is seen as a bid to resolve the problem of vehicles without third party insurance, reports Times of India. Over more than half of the vehicles, particularly two-wheelers and cars, ply on roads without third-party insurance, even though such cover is mandatory.
With long term motor third party liability insurance, policyholders will benefit in the form of reduced insurance premium as more vehicles will be brought under the insurance coverage. They can also avoid the hassle of renewing the policy every year. Moreover, they will have some stability in rates during the insured period.
IRDAI’s call on insurers to design long term motor third party policies follows a recommendation in April by the Supreme Court Committee on Road Safety that insurers issue long term covers – five-year policy for two-wheelers and three years for four-wheelers.
The proposed long term policies pose a risk to insurers. One reason is that regulations change. Inflation could also rear its head during the term of the policy.