Business

IRDAI okays standalone own-damage policy

Conditions apply: Insurers must ensure that OD cover is offered only if a TP cover already exists.

Conditions apply: Insurers must ensure that OD cover is offered only if a TP cover already exists.   | Photo Credit: Gettyimages/istock

Bundled policies for third-party, own-damage cover not compulsory

The Insurance Regulatory and Development Authority of India (IRDAI) on Friday allowed insurers, with effect from September 1, to issue standalone annual own damage (OD) cover for cars and two-wheelers, both new and old.

“Consequently, the issuance of bundled policies for cars and two-wheelers will not be compulsory,” the regulator said in a partial modification of a circular it had issued in August in the backdrop of a Supreme Court order.

Policyholders have the option to renew the OD component of a bundled cover falling due on or after September 1, 2019, with the same insurer or different insurer, on an annual basis, the latest circular on IRDAI said.

Insurers will, however, continue to have the option to offer package policies, in addition to stand-alone OD and TP (third party) policies. Long term, stand-alone OD policy will not be permitted for the present, the regulator said. Last year, implementing the directions of the Supreme Court, the regulator had introduced longer term third party cover for new vehicles — three years for cars and five years for two-wheelers.

In doing so, it had given insurers the options of providing long-term package cover comprising motor TP and OD insurance for three or five years as the case may be; or a bundled cover with a three or five-year term for the third-party component and a one-year term for the OD.

The introduction of the mandatory long-term TP insurance cover meant an increase in the cost of insuraing new cars and two-wheelers, something that automakers sought to cite as a reason for slowdown in sales.

While permitting the issue of standalone OD and TP covers, the IRDAI has asked the insurance companies to ensure that those seeking OD should have a valid TP.

“Insurers shall ensure that OD cover is offered only if a motor TP cover is already in existence or is taken simultaneously.” The name of the insurer, policy number and the start date and end date of the TP policy shall be indicated in the OD policy document.

Senior vice-president, Personal Lines UW of Raheja QBE Puneet Sahni welcomed the IRDAI decision and expected the move to augur well for the customers as it may lead to a reduction in the OD premium rates. Third party cover rates, however, would remain the same across the insurers as they are regulated and bound by the tariff fixed by IRDAI.

Company secretary and compliance officer of Bajaj Allianz General Insurance Onkar Kothari said the circular from IRDAI provides much needed clarity in terms of insurer’s approach for standalone motor OD policy, its pricing and duration. It’s going to be an annual policy. It has also made it mandatory for insurers to ensure that no vehicle should be insured only for OD cover and the insurer needs to mention start and end date of TP policy and name of its issuer while giving standalone OD policy.

It also provides clarity to the customers who have opted for bundled cover. Now they have an option to renew their OD part from an insurer of their choice rather than continuing with the one they had for TP.

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Printable version | Feb 20, 2020 10:12:01 AM | https://www.thehindu.com/business/irdai-okays-standalone-own-damage-policy/article28103046.ece

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