IRDAI withdraws 3/5 year plans over viability

The Insurance Regulatory and Development Authority of India (IRDAI) has released a circular announcing the withdrawal of long term package plans including 3rd party insurance as well as own damage. The withdrawal will be effective  from August 1, 2020.

Some of the reasons mentioned by the IRDAI include challenges in actuarial pricing for long term own damage policies, distribution of polices is difficult, it is an expensive proposition, and a possibility of owners selling their vehicles due to financial reasons / default in loans. IRDAI also mentions that customers of the said policies would be burdened with the same insurer if they get deficient service and calculation of no claim bonus (NCB) is not uniform, leading to confusion amongst policy holders.

The Supreme Court had issued a circular on August 28, 2018 directing all insurers to offer only 3 and 5 year policies for new 4-wheelers and 2-wheelers respectively. The applicable date for this rule was September 1, 2018. Since September 2019, the insurers have also been offering stand-alone own damage covers, including for fire and theft.