New Delhi, Business Desk. Insurance Regulatory and Development Authority of India (Irdai) said on Tuesday that it has withdrawn the Long Term Motor Third Party Insurance Package. Let us tell you that the long term motor third party insurance package used to be 3 years for four wheelers and 5 years for two wheelers. These long term motor insurance policies will not sell from August 1, 2020.
According to Irdai, distribution of long term third party policies is challenging as it falls heavily on the pockets of most vehicle buyers. Irdai stated that in case of long term third party insurance, there is a high probability of forcibly selling the policy and linked insurance and the policyholders thus get an insurance product that does not have flexibility.
Irdai said that the structure of no claim bonus is not uniform among insurance companies and this can lead to dissatisfaction and confusion among policyholders. The insurance regulator also said that actuarial pricing has been a challenge for insurance companies in terms of long term on damage cover.
Now customers will not be given the option to buy long-term damage on their own. Earlier, Irdai had asked insurance companies to provide customers with the option to purchase a one-year and long-term damage plan. On Damage Cover, the vehicle is compensated for the physical damage, theft, accident and natural disaster.
Also Read: Five out of ten urban consumers to cut spending: EY report
In 2018, the Supreme Court ordered that a 5-year long-term policy would be mandatory for two-wheelers and 3-years for four-wheelers, in order to have a valid cover for vehicles plying on Indian roads. The insurance companies then offered long term policies to the customers.
