Two-wheeler owners can now avoid the hassle of buying cover every year with the regulator allowing a three-year insurance policy. The Insurance Regulatory and Development Authority has devised a three-year version of the mandatory third-party liability cover and it has encouraged companies to come up with policies that cover the vehicle.
"We are definitely interested in filing a long-term product. In two-wheeler segment there are a large number of owners who forget to renew their policy after the first year and a long-term cover will help reduce the number of uninsured vehicles on the road," said G Srinivasan, chairman, New India Assurance. He added that besides long-term two-wheeler insurance, the company was keen on launching similar policies for cars.
In a circular to all general insurance companies, IRDA said that the total premium for third-party insurance would be thrice the annual premium and it cannot be changed during the tenure of the policy. "The authority is also conscious about the fact that there is a need of long-term comprehensive (own damage plus third-party) cover also. Insurers are encouraged to file 3 year term comprehensive policies as per file and use guidelines," said IRDA.
Unlike commercial vehicles which insurers are reluctant to insure because of the high claims ratio, two-wheeler insurance is not loss-making. It is the low-ticket size involved that discourages insurers from going the extra mile to renew policies. "The third-party claims ratio in two-wheelers is less than 100% and insurers will not have any problem in issuing long-term policies" said Srinivasan.
According to a statement by Royal Sundaram Insurance the three-year policy will reduce costs in issuing policies, administering them and in follow-ups for renewals. This could also lead to lower premiums as insurers could share the cost savings.
Estimates by insiders in the industry say that close to half the vehicles on Indian roads are uninsured. This estimate is based on the huge difference between the number of registered vehicles and the number of motor insurance policies. Insurers say that while the level of compliance is high in large cities, in smaller towns and villages old vehicles are rarely insurance.
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