In a notification, Insurance Regulatory and Development Authority of India (IRDAI) has withdrawn the newly launched long term-third party insurance cover which is issued for three/five years for new vehicles and two-wheelers. This will be effective from August 1, 2020 and make insurance cover affordable for vehicle owners.
The regulator has withdrawn the scheme after the concerns were raised over the effective implementation of the scheme. It was introduced in September 2018 but the matter was soon taken in the Supreme Court to revoke the scheme.
In its circular, the IRDAI said, “The Authority reviewed the various options of long term and annual motor insurance covers now being offered to the prospects/policyholders pertaining to own damage.”
Further, the insurance regulatory authority said that after a carefully examining the performance of these long-term package motor insurance covers they’ve been withdrawn with effect from August 1, 2020.
IRDAI also said, the actuarial pricing has been a challenge for insurers in long term own damage covers and distribution of package policies also has its own challenges. The affordability point for a large section of owners of vehicles was the major issue.
IRDAI also took cognisance of the note that there is a large possibility of forced selling. It is because financial interest are being linked to loans is very high and in case of poor or unsatisfactory services, motor vehicle insurance policy holders could end up with a long term bad product with no option to change or amend the terms of policy. This also acted as a major deterrent against the 2018 decision.
IRDAI has now directed all general insurer companies except standalone health insurers and specialised insurers to offer only 3 year Motor third party insurance policy for new cars and five year third party policies for new two-wheelers.