Hyderabad:
Finding fault with the ways the whole scheme of long-term package motor insurance products, three year for cars and five years for two-wheelers,are being implemented by the general insurers,since they were launched in Sep 2018, the insurance regulator,IRDAI has decided to scrap these products from August 1, 2020.
Effectively,now the insurers have to go by another circular issued by the IRDA on June 2019, asking them to make available stand-alone annual own damage covers)including standalone OD cover for fire and /or theft if opted for by the policy holders for cars and two-wheelers both new and old,
Post withdrawal of long-term package motor insurance products,the existing No Claims Bonus(NCB) in respect of long term package policies already issued will accrue only when the policy term has been completed, said the IRDAI.
The auto industry, whch has been slowing down for over a year, has been demanding the withdrawal of these long term motor insurance products as it was adding to the cost of the vehicles for the customers. said analysts.. .
According to Subrata Mondal, executive vice president, IFFCO Tokio General Insurance,IRDA's move to withdraw long- term motor insurnace products will bring a relief to those planning to buy new vehicles, as upfront payment of insurance premium for multiple years was an additional burden for many customers.
“This has also come at the right time as we see many auto dealers have started reopening their outlets in cities after long country-wide lock down due to the Covid-19 pandemic.This may also lower the cost of ownership for the customers.Moreover, from insurers' perspective pricing for long term cover was a challenge as there was administrative challenges for No Claim Bonus allocation.However, this will be a learning experience and also demonstrates our readiness in adapting to changing customer demands,'' he said..
The IRDAI has reviewed the various options of long term and annual motor insurance covers now being offered to the policyholders pertaining to the own damage(OD).After a careful examination of the performance of long term package covers and following concerns relating to its implementation since its introduction in September, 2018, the authority has decided to withdraw long term package covers offered for three years or five years for new cars and new two-wheelers respectively with effect from 1st Aug, said TR Alamelu, member(Non-life), IRDAI on Tuesday..
The IRDAI has decided to withdrw the long term motor policies on the following grounds-
– Actuarial pricing has been a challenge for insurers for long term own damage cover,
-Distribution ofpackage policies has its challenges due to affordability factors for a large section of owners of vehicle,
-The possibility offorced selling due to financial interest/being linked to loans is high,
-In case of deficiency in services, policy holders would be saddled with a long term product with flexibility to change options,,
-The No-claim Bonus structure is not uniform among insurer and this could lead to confusion and dissatisfaction among the policyholders