[TusharK]

The Insurance Regulatory Development Authority of India (IRDAI) has notified all insurance companies to design long-term third party insurance policies for cars and 2-wheelers. The notification stated that the cover period should be 4 years for cars and 5 years for 2-wheelers. At present, motor insurance is issued annually.



According to IRDAI, long-term third party motor insurance policy will reduce the need for renewing the policy every year. It is estimated that just 50% of the vehicles plying on Indian roads are currently insured. This number could increase with the introduction of long-term policies. The move is also expected to bring down the insurance rates.

These long-term policies will be filed under the file-and-use procedure, while the regulator will decide the rates. In March 2018, IRDAI reduced the third party insurance premium for cars with engines smaller than 1,000 cc by 10% to Rs. 1,850. The premium for cars falling in the 1,000-1,500 cc category has been set at Rs. 2,860, while for those with engines larger than 1,500 cc is Rs. 7,890. Third-party insurance premium for 2-wheelers was also reduced.

Source: Economic Times

Link to Team-BHP News

[ghodlur]

On one hand the TPL premiums is proposed to be offered on a long term basis, on the other hand Insurers are planning to hike the TPL premiums due to the hit after government increased the compensation payouts.

http://www.timesnownews.com/business...res-why/233667

[aadya]

Originally Posted by ghodlur

On one hand the TPL premiums is proposed to be offered on a long term basis, on the other hand Insurers are planning to hike the TPL premiums due to the hit after government increased the compensation payouts.

Good initiative by the government. But some thoughts to make it better

1. TP cover could be linked to road tax(there are states which charge it for five years) and the amount charged can be decided on the basis of auction to the insurance companies, on monthly or quarterly basis. This will push the insurance companies to compete rather than whine.

2. Parivahan data base should contain the TP insurance details(which is already displayed but not updated properly) so no need of carrying insurance documents.

3. Own damage cover is completely delinked and the duration/IDV etc can be given to the discretion of the owner. So it would be a reverse quote situation in aggregator website. For instance I can raise a request for an IDV of 5 Lakhs for 1500 cc sedan for 12, 15 or 18 months or whatever period and the Insurance companies will present quotes to me.

[GTO]

Originally Posted by TusharK

According to IRDAI, long-term third party motor insurance policy will reduce the need for renewing the policy every year. It is estimated that just 50% of the vehicles plying on Indian roads are currently insured. This number could increase with the introduction of long-term policies. The move is also expected to bring down the insurance rates.

Agreed. At least 10 - 20% of folk will simply forget to renew something as basic as 3rd-party insurance. Because it doesn't protect you from losses, it's not exactly a top priority for most (2-wheeler owners have an especially dismal record in renewing 3rd party insurance).

Originally Posted by ghodlur

On one hand the TPL premiums is proposed to be offered on a long term basis, on the other hand Insurers are planning to hike the TPL premiums due to the hit after government increased the compensation payouts.

Maybe paying in one shot for 4 years will save us from the annual increments? Since we've already paid? No harm in hoping .

[locusjag]

Typically, the insurance industry would seek to be nimble and have (at least) an annual rate revision where a regulator would take into account loss trends and profitability levels in the past year of all the insurers to fix the rates.

But - one needs to keep in mind that insurance penetration is abysmal in India and to get to a decent level of penetration, long term policies are par for the course. It's a great idea.

And yes, once committed to, the long-term policies' premiums would be set. They cannot be increased (or decreased) midway.

Unlike other countries where inclement weather causes higher crash rates and hence necessitates frequent auto insurance rate revisions, in my opinion as an insurance industry analyst, I'd say that for India rates don't need to be revised every year. But I'm skeptical if the impact of inflation would be factored into the 5 or 4 year premiums or not. They'd better factor in inflation since in 5 years, a lot changes price-wise.

[ghodlur]

Originally Posted by GTO

Maybe paying in one shot for 4 years will save us from the annual increments? Since we've already paid? No harm in hoping .

Unless things are pretty transparent, the long term premium paying should be doubted.
1) How will the TPL be treated if one sells his car after a couple of years of buying the 4 yr TPL policy
2) Will this mean separate TPL and comprehensive policies
3) Will the govt prove to be smart ass by increasing the tax component rather than the premium itself.

Unless the Insurance co's demonstrate the 4 yrs TPL premium payment option is a hit amongst the 2 wheelers, it will be very difficult to convince the 4 wheelers. In fact this should be an attractive option for the heavy vehicles/commercial vehicles.

[Sankar]

The pre-owned 1970 Enfield Bullet I bought in 2006 from fellow bhpian Psycho came with third party life time insurance cover (took by owner the before Psycho) from new india assurance if i remember correctly. The policy was valid for 15 years.

[libranof1987]

I'm about renew Insurance for three of my vehicles and I can see the option to renew the third-party bit for a variety from periods: 1/2/3/5 years. What I've observed is (on PolicyBazaar and individual provider websites), the discount ranges from anywhere between 20 to 27%.

Personally, I'm more comfortable doing this exercise year on year.

[Hayek]

Interesting. Third party insurance is already a long tail product - because the claim processing and payout takes 7-8 years or more in most cases. By making it a four year policy, it becomes an even longer tail product, and the insurance companies should be able to reduce headline premiums to compensate for time value of money. Let’s see how this plays out.

[AJo]

Just received the attached IRDA circular from my dealer. (While booking my car). A three year 3rd Party Insurance is mandatory for new cars from 1st Sept'2018. Hence the dealer wants to do the invoice dated 31st Aug'18 so that this does not apply to the car.
AJ

[jpcoolguy]

Some questions on this extended 3rd party insurance -

1. Are these 4 years period is mandatory only for Third Party insurance component or applicable for Comprehensive as well? Shall I have the separate add-on covers like Zero Depreciation cover on a yearly basis?

2. If it is applicable to comprehensive as well, then what is the impact on NCB % on my insurance, as the NCB % will be higher for subsequent years?

3. Also, normally the IDV of the vehicle will be calculated based on the depreciation %, in case of Comprehensive policy, so I will be paying more on Own Damage premium right?

4. If this is not applicable on Comprehensive component of the policy, then what purpose it solves if I need to renew my Comprehensive policy every year again?

[AbhiIyengar]

Originally Posted by jpcoolguy

Some questions on this extended 3rd party insurance -



1. Are these 4 years period is mandatory only for Third Party insurance component or applicable for Comprehensive as well? Shall I have the separate add-on covers like Zero Depreciation cover on a yearly basis?

I will try to answer basis my understanding. The 3year and 5year mandate is only for the Third party insurance for cars and bikes respectively. The Own Damage insurance can still be taken for a year and renewed annually.

Experts, please throw some more light!