For a vehicle owner, it reduces the hassle of renewing the policy every year. The customer can buy policy once and get a peace of mind for 3 to5 years.
Do you know that more than 60% of the two-wheelers on roads are uninsured and close to 30% Cars? In case of an unfortunate accident, the uninsured vehicle owner may not be able to compensate the victim or his family, thus it is very important for every vehicle owner to have at least third party insurance.
The Supreme Court committee on road safety is of the view that insurers should give an option of 3 years & 5 years Third party Insurance for cars & two wheelers respectively. In this backdrop, IRDAI has asked insurers to file these products & offer these options to the customers.
Animesh Das, Head of Product Strategy - ACKO said that this is a welcome move as it will directly help to increase the Insurance penetration. For a vehicle owner, it reduces the hassle of renewing the policy every year. The customer can buy policy once and get a peace of mind for 3-5 years. In addition to this, customers will get the flat rate for 3-5 years Insurance and thus they will save money against the inflation. If we look at last 5 years, the Third-party Insurance premium (which is decided by IRDAI) for two-wheelers has been nearly doubled & has increased to 2.5X for cars. So, opting for long-term policy will save the customer against these premium hikes as well.
An important point here is that long-term policy for 3 years for car & 5 years for two-wheelers will be offered only for third party insurance and not for the comprehensive cover (which includes vehicle damages). Currently, maximum one-year comprehensive policy for car & three years comprehensive policy for two-wheelers can be offered by insurers.
Also, one should not compare the third party insurance with the comprehensive cover. Third Party insurance is for the damage caused by you to any third party whereas comprehensive insurance policy covers own damage and third-party insurance both.
Tarun Mathur- Chief Business Officer, General Insurance, Policybazaar.com said Third Party insurance and comprehensive insurance policy are two different categories of motor insurance because TP insurance is mandatory by law whereas buying a comprehensive policy is purely a customer' choice to give 360 protection to your vehicle and any damage to other vehicles. “The premium for own damage is charged to cover the cost of repair (basis depreciation) for your own vehicle in case of an accident, fire, theft etc.,” he said.
Given, third-party insurance has low ticket size, usually, intermediaries were promoting comprehensive cover vs third party only. Now with 3-5 years option, Intermediary may find the third party as a lucrative option to offer and thus the availability of these products will increase for consumers which will further result in higher penetration of Insurance.
Devendra Rane, Founder & CTO - Coverfox.com said that long-term policies from the insurers will thus lock-in lower premium rates. At the same time, it removes the hassle of remembering the impending due dates for insurance renewals. This will also motivate vehicle owners to secure their vehicles with a proper insurance, thus increasing the penetration of insurance and thereby bringing the premium rates further down. “IRDAI has recently motivated the people to get their vehicles insured by reducing the third-party premium rates for cars with engine capacity less than 1000cc to Rs 1850 and for two-wheelers with an engine capacity less than 75 cc to Rs 427,” he added.