IRDA mulls five-year term for car insurance
22 Jul 2014
The Insurance Regulatory and Development Authority of India (IRDA) is considering a proposal to allow insurers to offer policies with five-year cover and is expected to issue fresh guidelines for such long-term products.
If accepted, this would ease the burden of annual renewals of car insurance policy for the vehicle owner while ensuring assured business for insurance companies for five years at one go, instead of annually at present.
These policies could also come cheaper for both the consumer and the insurance company as it would help avoid the hassles connected with annual renewal of policies.
Moreover, with insurance premiums skyrocketing and insurance companies raising prices almost every year, car owners are less inclined to renew the insurance cover promptly. Also, many car owners opt for minimum cover like third-party insurance in order to reduce insurance costs.
For most car owners, insurance is an unnecessary burden which they want to avoid if possible.
"Several companies have pointed out that insurance renewals are not happening, so if we have a long-term product right at the inception, it may also promote the insurance culture," the IRDA official said
"Some insurers have submitted proposals in this regard and we are evaluating them. We can start with such policies in the two-wheeler segment first," said an official with the Insurance Regulatory and Development Authority (IRDA), adding that based on the experience, similar products for commercial vehicles can be launched.
IRDA aims to use cheaper, long-term insurance cover to promote insurance sales in rural areas.
With an increase in vehicle sales, insurance companies also stand to benefit from increased insurance sales.
Domestic passenger car sales increased by 14.76 per cent to 160,232 units in June 2014, against 1,39,624 units sold in the year-ago month. Sales of motorcycles climbed 9.63 per cent to 8,76,196 units from 7,99,254 units a year earlier, during the period.
