As the Sep1 dead line for launching the long term motor policy, as earlier instructed by the Supreme Court, is fast approaching , the insurance regulator IRDAI has issued detailed guidelines and pricing for the new range of products on Tuesday.
“It would suffice if the insurers file a letter of Intent signed by the CMD/CEO, with IRDAI in the format specified by the IRDAI through e-mail and follow it up with a physical copy for records. A UIN will be allotted to each product immediately on receipt of letter of intent, which will be filed before 30th August, 2018,'' said PJ Joseph, member, (Non-life), IRDAI while notifying the new norms.
Motor Third Party Insurance
The long term premium rates for a three year Motor TP policy-private cars not exceeding 1000 cc sold during the period – 1st Sep 2018 to 31st Mar 2019, is fixed at Rs 5286.For a vehicle exceeding 1000 cc but not exceeding 1500 cc, the premium is charged at Rs 9,534.Similarly,for a vehicle exceeding 1500 cc, the premium is fixed at Rs 24,305.
For a third party two wheeler policy, not exceeding 75 cc, the premium will be at Rs 1045,while for a two wheeler,exceeding 75 cc but not exceeding 150 cc, it will be Rs 3285. For a two wheeler , exceeding 150 cc but not exceeding 350 cc, the premium will be at Rs 5453.For a two wheeler, exceeding 350 cc, the premium will be at Rs 13.034.
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.In other words, it will be recognised for each year as 1/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 will only be recognised as income and the remaining premium will be treated as “Premium Deposit” or “Advance Premium”.
IRDAI further said no motor third party Insurance may be cancelled by either the insurer or the insured except on the following grounds:
(b)Vehicle not in use anymore because of Total Loss or Constructive Total Loss
(c). In the event the vehicle is sold and/or transferred
The insurers has to ensure that third party insurance cover is available to all proposers through online channels as well. They will also liaise with the police authorities to facilitate issuance and renewal of third party insurance cover and ensure its easy availability, said IRDAI.
They have to also advertise about the introduction (including the mandatory nature) of long-term motor third party insurance, added IRDAI.
Motor Own Damage Insurance cover
Currently, as far as Motor Own Damage Insurance is concerned, Package Policies (comprehensive covers) are available wherein two components are covered—Motor Third Party Liability and Motor Own Damage cover. After the introduction of long term Motor Third Party Insurance for new cars and new two-wheelers, an insured may be given the following two options:
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.
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.
Insurers may price the Own Damage component of the long term package covers suitably, in line with their current approach for pricing. Given the immediate need to offer long term package covers, insurers may start issuing such policies effective 1st September, 2018 even while ensuring filing such products under the File and Use Guidelines before 15th September, 2018.
If the IRDAI finds the pricing approach in variance from their general pricing philosophy/approach for Motor Own Damage and not in line with actuarial principles, suitable direction may be issued by the Authority. As regards pricing of the one-year term component of the OD component of the bundled product, it shall be the same as in existence for the OD component of package policies currently.