Following a Supreme Court order, the insurance regulator has asked all general insurance companies to offer long-term third-party motor covers to policyholders. Through a circular issued on August 28, the Insurance Regulatory and Development Authority of India (Irdai) has directed insurers to offer five-year policies for new two-wheelers. This will be effective from September 1, 2018.
|Vehicle category||Long Term Premium Rates for 5 yr Motor TP sold during period September 1, 2018 to March 31, 2019 in Rs.|
|Not exceeding 75cc||1045|
|Exceeding 75 cc but not exceeding 150 cc||3285|
|Exceeding 150 cc but not exceeding 350 cc||5453|
|Exceeding 350 cc||13034|
The premium has to be collected for the entire term (three years or five years as the case may be) at the time of sale of insurance but would be recognised on a yearly basis. According to IRDAI, "It shall be recognised for each year as l/n of total premium as Gross Written Premium during that year where 'n' is the term of the policy. Thus, the premium for the year shall only be recognised as income and the remaining premium shall be treated as 'Premium Deposit' or 'Advance Premium'."
Currently, as far as motor own damage insurance is concerned, Package Policies (i.e. comprehensive covers) are available wherein two components are covered- Motor Third Party Liability and Motor Own Damage cover. According to the Irdai circular, after the introduction of the long-term motor third-party insurance for new cars and two-wheelers, an insured may be given the following two options:
1. Long-term package cover offering both motor third-party insurance and own damage insurance for three years or five years as the case may be.
2. A bundled cover with a three-year or five-year term (as applicable) for the third party component and a one-year term for the own damage.
With regards to the pricing of the one-year own damage cover of the bundled product, it will remain same as it is now.