June 10, 2020 3:28:32 am
The Insurance Regulatory and Development Authority (Irdai) on Tuesday withdrew the long-term motor third-party insurance package for three years and five years for four-wheelers and two-wheelers, with effect from August 1, 2020.
According to Irdai, distribution of long-term third party policies is challenging as it is unaffordable for vehicle owners. The possibility of forced selling or being linked to loans was high and that policyholders are saddled with long term product with not flexibility, it said.
“The no claim bonus (NCB) structure is not uniform among insurers and this could lead to confusion and dissatisfaction amongst the policyholders,” Irdai said, adding that the “actuarial pricing has been a challenger for insurers for long term own damage cover”.
Now, customers won’t be given an option to buy OD covers on a long-term basis. Earlier, Irdai had asked insurers to give customers an option to choose between one year and multi-year OD plans. The OD cover offers insurance against physical damages to the vehicle due to theft, accidents and natural catastrophe.
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In 2018, the Supreme Court ordered that to ensure vehicles running on Indian roads have valid insurance covers, long-term policies of five years for two-wheelers and three years for four-wheelers would be mandatory. Insurance companies then started offering products on a long-term basis to customers.
This included an option package of OD and TP policies on a long-term basis. However, customers had also started to complain that since OD prices are not regulated by Irdai, pricing was high.
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