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Journalism of Courage
IN a relief to vehicle owners, insurance regulator IRDAI has asked general insurers to make available stand-alone annual Own Damage (OD) covers (including stand-alone OD cover for fire or theft if opted for by the policyholder) for cars and two-wheelers. The new regulation will be applicable for both new and old vehicles.
Consequently, with effect from September 1, 2019, the issuance of bundled policies for cars and two-wheelers will not be compulsory. Owners can buy OD and third party policies separately. Further, insurers will have the option to offer package policies, in addition to stand-alone OD and third party (TP) policies. Long term stand-alone OD policy will not be permitted for the present.
A comprehensive car insurance plan has two essential components: OD premium and third party (TP) premium. OD covers loss or damage to the vehicle insured due to accident including fire and theft. TP covers any damage or injury caused by the insured, to another person or property. A TP liability cover is mandatory in India under the Motor Vehicles Act, 1988.
Earlier, the IRDAI circular had stipulated a bundled cover, including OD insurance cover as a package product with a stand-alone motor TP insurance product — one year for OD bundled with long term TP cover for new car/ two-wheeler. Now this has been separated and vehicle owners can go for OD and third party separately.
Bundling of cover for the OD portion was earlier permitted as an immediate requirement, keeping in view the date of implementation stipulated by the Supreme Court from September 1, 2018, the Insurance Regulatory and Development Authority of India (IRDAI) said.
As per the new rules, policyholders have the option to renew the OD component of a bundled cover falling due on or after September 1, 2019, with the same insurer or different insurer, on an annual basis, IRDAI said.
For issuance of stand-alone OD annual cover as well as for renewal of the OD component of a bundled cover, insurers will have to ensure that OD cover is offered only if a motor TP cover is already in existence or is taken simultaneously. The name of the insurer, policy number and the start date and end date of the TP policy should be indicated in the OD policy document. The stand-alone OD policy should clearly mention that the coverage is only for own damage and no other liability in connection with the vehicle.
The pricing of a standalone OD policy will continue to be that being offered for the OD component of a package policy (the same was followed for the OD component of a bundled product as well).
However, if the insured takes a third party insurance cover from another insurer simultaneously, he or she can cancel the one automatically transferred, provided proof of new insurance is shown. Needless to say, this should apply to annual package and standalone TP policies also.
