Rohan bought a new car last month but he was concerned about our prime premium which was being requested a long term car insurance policy. The premium was straining his budget and that he did not know what to do. This is when he discovered that long term comprehensive policies happen to be discontinued through the IRDAI. He was relieved to locate a considerable reduction in his premium. Which are the changes IRDAI makes in long-term comprehensive car insurance policy plans?
The insurance segment is dynamic and also the Insurance Regulatory and Development Authority asia periodically makes changes in the structure and benefits of insurance policies. One particular change was made around 2021 when IRDAI introduced compulsory long-term car insurance policy policies for cars and bikes. According to the IRDAI mandate, cars and bikes bought on or after 1st September 2021 needed to carry a compulsory 3 year and 5-year third party coverage respectively. Own damage cover, however, was meant to be offered because of 3/5 years with the 3rd party cover or one year inside a bundled policy.
However, recently, IRDAI has withdrawn this mandate of having a long term own damage cover on cars and bikes. According to the latest changes made by IRDAI, 3rd party coverage would be offered for 3 and 5 years for cars and bikes respectively. However, the own damage cover would be available just for twelve months. Thus, insurance providers would are in possession of to sell the bundled car and bike insurance policies with long term third party cover and annual own damage cover.
Why the need for change?
In its circular where IRDAI withdrew the concept of long term own damage cover, various reasons were cited for that withdrawal. These reasons included the next –
- The concept of long-term comprehensive cover was not very practical for policyholders who needed to spend considerably considerable amounts of premium when buying the policy
- The long term comprehensive plans weren't very much sought after as policyholders usually opted for bundled policies to reduce their premium outgo
- In many cases where policyholders were unaware of the supply of bundled plans, long-term comprehensive plans were miss-sold for them by agents and distributors that was unethical
- In a lasting comprehensive plan, policyholders were tied up with one insurance provider for that given tenure with out the flexibleness of changing insurers
- The no-claim bonus offered under long term comprehensive plans were not uniform across insurance providers. The bonus was allowed once at the time of renewal following the long-term period was over. This resulted in a minimal bonus for policyholders who are able to otherwise claim no claim bonus every year on renewals. Because the bonus was low, policyholders lost around the discount at hand making long-term plans unfavourably for them
What does the change mean for you personally?
If you've bought a new car or bike on or after 1st September 2021, you don’t have to buy a long term comprehensive policy on your vehicle. You would have to buy a bundled policy where the own damage cover could be allowed every year while the third party cover would continue long-term. You can take advantage of this move in the next ways –
- Your upfront premium outgo would reduce
- You can claim a higher no claim bonus while you renew the own damage cover every year
- You can certainly switch insurance companies if you are unsatisfied with your present insurer or if you find lower premium rates with another
So, your automobile insurance policies would cost less and you would be able to compare and buy a standalone own damage cover your vehicle from any insurer. This move would help you afford an electric motor insurance policy easily making the coverage popular. Rohan knew that he can certainly afford a bundled policy and you can too. So, next time your motor insurance plan's up for renewal, your premium outgo would be much lower thanks to the new IRDAI regulation.
