According to IRDAI, long-term vehicle insurance package will not be a mandatory affair while buying a new car. The cars will now be sold with a 1-year policy only.
According to a recent report, the long-term vehicle insurance policies that offer third-party damage cover for 2-wheelers (3 or 5 years) and cars (3 years) will no longer be offered from 1st August 2020. The immediate result of this order will be a logical reduction on the on-road price of the vehicle as a lot of dealers have been offering the three-year long-term insurance package.
The new policy will implement from 1st August 2020
This decision to stop long-term package policies has been implemented by IRDAI (Insurance Regulatory and Development Authority of India). IRDAI feels that the distribution of long-term package comes with a lot of challenges that make the process of buying a new vehicle quite tough for those who have a constrained budget. This decision has been brought in to effect as IRDAI understood that long-term third-part insurance covers increased the on-road price of the car. Also, the insured has to lug around with the same insurance distributer throughout the policy interval.
As per the notification issued by IRDAI, "Pursuant to the decision of the supreme court in the matter of WP no. 295/2012 of Shri S. Rajaseekaran vs union of india and Ors, the authority issued circular ref: IRDAI/NL/CIR/MOT/13708/2018 dated 28th August, 2018, directing that all general insurers shall offer only three year motor third party insurance policies for new cars and five year motor third party insurance policies for new two wheelers with effect from 1st September, 2018. After a careful examination of the performance of the long terms package covers and the following concerns relating to its implementation, the authority has decided to withdraw long term package covers offered for 3 years or 5 years for new car and new 2 wheelers respectively with effect from 1st August, 2020."
The customers will no longer have to pay for own damage motor insurance cover for a long-time
This means that the potential buyers will no longer have to pay for own damage and third-party motor insurance cover for a longer duration of time in one go. There’s also a new update in the pipeline with an earlier order by IRDA in which they asked the insurer to offer the customers with an option to select between one-year and longer plans. From now, the automakers will only be able to sell 1-year own damage cover and third-party insurance like it used to be the case initially.