Two-wheeler owners in India can now avail insurance policy for three years in one go instead of renewing it every year. Insurance regulator has revised its guidelines which say that the thirld party (TP) insurance for two-wheelers can be renewed at once for a term of three years. As of now, the owners had to do it annually which also meant that most of the owners did not opt for it second year onwards.
Insurance Regulator and Development Authority of India (IRDA) has allowed the insurer to charge three times the annual fee for two wheelers. The insurers have also been barred from revising the premium on the policy in any way during the period of the policy.
"In effect, the policy will be inflation neutral and will thus benefit the policy holders," said Rakesh Jain, CEO of Reliance General Insurance.
Roughly, half of the two-wheeler owners do not have insurance policy which is harmful for individuals as well as insurance companies. India follows a policy of providing unlimited third party cover in case of any road accidence while general insurance companies contribute towards third party motor pool. Insurers have asked IRDA to allow them to offer a longer term cover for motor insurance as the claims are very high in this segment particular with many vehicle owners not taking any cover even though it is mandatory.
"Three years cover for two-wheelers is only the starting point. IRDA may extend it to other vehicles also in due course of time," said K K Mishra, MD and CEO, Tata AIG.
IRDA has also stated clearly that the insurance companies will not be allowed to cancel the standalone TP cover in any circumstances unless its a case of total loss.
New India Assurance, the largest player in third party motor insurance at Rs. 2,306 crores for the quarter ending in June 2014 is in the process of submitting a letter of intent for this product. "The move will improve premium collections and also increase penetration," said K Sanath Kumar, Director and General Manager, New India Assurance.