From the coming fiscal, you may be saved the hassle of renewing motor insurance policies for your vehicles annually.
To address the problem of a large number of vehicles running without cover, the General Insurance Council is planning to make motor third party insurance policies valid for three to five years, from the existing one-year term.
R Chandrasekaran, Secretary-General, General Insurance Council, said the step is to ensure that there is continuity of insurance cover and all vehicles plying on the roads are covered, especially two-wheelers, a segment which has seen a big drop in renewals.
The council is working on the pricing mechanism for such policies as the premium for third party insurance is fixed by the Insurance Regulatory and Development Authority.
The move will benefit customers as, apart from shedding the burden of annual renewal, long-term policies could be priced lower with insurers factoring in the no-claims discount and bonuses.
A motor insurance covers one’s own and third party damage to property or life. Vehicle owners have the option of choosing between a standalone (third party) and a comprehensive cover.
General insurance companies, which are bound to settle motor third party insurance claims with no cap on liability, paid out twice the premium amount collected on account of claims under the declined pool.
The annual liability on account of third party motor insurance is estimated to be ₹8,000-10,000 crore for the general insurance industry.
According to industry sources, though it is mandatory for vehicles to have insurance cover, an estimated 70 per cent of two-wheelers and 35 per cent of four-wheelers are uninsured.
Sanjay Datta, Chief of Underwriting and Claims, ICICI Lombard General Insurance, said most vehicles exposed to high risk are insured while in the case of others the policies are often not renewed, causing huge structural problems for insurers.