Long Term Motor Insurance Pulled Backed by IRDAI
Introduced in September 2018, with a choice to either have both, third-party and own damage insurance covers for a span of 3 years or 5 years, is now being withdrawn by the Insurance Regulatory and Development Authority of India (IRDAI). The question is, with this decision, are the vehicle owners at the benefiting end? Read on to understand the details around this directive by IRDAI.
With the withdrawal of the long-term vehicle insurance by IRDAI, new car owners will not be able to avail of this plan from 1st of August. Initially, customers had the option to select own damage plans that offered coverage against accidental damage, accidents and natural calamities.
But considering the benefits held by the plan like no hassle of annual renewal, the withdrawal decision had heads turning. According to experts, this move would prove beneficial to customers as it has become expensive with a probable higher premium quoted for continuing this cover by a new insurer. However, as per IRDAI, this withdrawal decision was a result of the concerns that were raised in the implementation of this long-term insurance policy. In a circular, IRDAI stated that the actuarial pricing has been a tough trial for insurers when it comes to long-term own damage cover. The circular also highlighted that the package policy distribution comes with its set of adversities with the affordable factor for a huge section of vehicle owners.
So, what will be the impact of this change for the insurance buyers? Read on to understand more.
One of the big advantages held by this withdrawal decision for the consumers is the cost. With this withdrawal, the cost that a customer must bear for the first-year car or bike insurance cover comes down. This consequently reduces the upfront cost of the vehicle for new buyers.
Apart from the cost, this withdrawal gives the customer a freedom to switch the Own Damage cover from one insurer to another on first-year renewal, so policyholders are not obligated to stick to an insurance company for 3 or 5 years.
Along with the positives, this change also impacts the insurance buyers negatively. Earlier, with a long-term vehicle insurance, customers had to pay a fixed premium for 3 consecutive years. However, with this change, there lies an uncertainty of rise in second-year premium for customers as the insurer has the ability to price the second-year premium on its underwriting terms.
Such a scenario fuels the competition of insurers in India, which could be beneficial for customers.
With the withdrawal of long-term motor insurance. IRDAI has opened new possibilities around motor insurance for both, insurance companies and customers. Despite this change, customers would still be in a win-win with certain benefits such as No Claim Bonus upon renewing their long-term motor insurance. With respect to this, the NCB will be provided as per the India Motor Tariff, depending on the annual claims made within the long-term vehicle insurance policy term. Having said that, it is important to understand whether the NCB on the total 3-year long policy may equal, come close to or even exceed the renewal premium. It all starts with picking the right and reliable plan on renewal, like the ones available on Finserv MARKETS. With cashless claim settlement, 24*7 assistance, and more, the car insurance and bike insurance plans give you great value for money.
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