IRDAI Withdraws Long Term Package Motor Insurance In India, Here’s Why

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With the introduction of revised guidelines, long-term own damage cover will not be allowed while only the mandatory 3-year and 5-year third party motor insurance will be given
It has come to light that the long-term package motor insurance policies that provide third-party and own damage cover for two-wheelers (3 or 5 years) and four-wheelers (three-years) will no longer be offered from 1 August 2020. A direct consequence of this will be a reasonable reduction in the on-road price as many dealers have been providing the aforementioned long-term package.

The decision to stop long-term package policies has been taken as IRDA, the insurance regulator, feels that the distribution of package policies comes with a fair share of challenges that make the purchase of vehicles quite tough for those on a strict budget.

What this clearly means is that the customers will no longer be able to buy own damage motor insurance cover for a long-term period. The latest update is in line with an earlier order by the Insurance Regulatory and Development Authority of India (IRDAI) in which it had asked insurers to provide the customers with an option to choose between one-year and longer plans.

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Now, however, companies will be able to sell only one-year own damage cover along with the mandatory three-year or five-year third party cover. Also, like before, bundled policies comprising one-year own damage cover and multi-year third party cover will continue to be on offer.

However, the latest decision has been made after several consumers complained that as OD prices are not regulated by IRDAI, prices were often too high. Also, many policyholders were not satisfied over No Claim Bonus structure in long term full packaged insurance policy. The regulator even admitted in a June 9 circular that having accurate prices for own damage cover is a challenge. It also admitted that even the possibilities to oversell are quite high.

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