BackIrdai proposes long-term motor insurance policies. Check details
Irdai proposed a three-year policy in respect of private cars co-terminus with motor third party liability cover and a five-year policy in respect of two-wheelers co-terminus with motor third party liability cover.
PremiumThe Insurance Regulatory and Development Authority of India (Irdai) has proposed allowing all general insurers to offer long-term motor insurance policies to allow policyholders a wider choice.
The regulator proposed a three-year policy in respect of private cars co-terminus with motor third party liability cover and a five-year policy in respect of two-wheelers co-terminus with motor third party liability cover.
As per the draft, Irdai said, “Pricing of long-term policies is to be made based on sound actuarial principles considering all the relevant aspects of rating including claims experience, lower anti-selection, reduced policy administration and acquisition costs given higher renewal rates, long-term discount, expected NCB level by the end of the policy period and applicable government taxes etc. The Pricing of add-on and optional covers may likewise consider the cost efficiencies of policy administration."
The insurer should collect the premium for the entire term of the policy at the time of the sale of insurance. But the premium for the year shall only be recognised as income, and the insurer should treat the remaining amount as a premium deposit or advance premium.
All long-term policies would have standard conditions relating to cancellation/refund of premium. For instance, every long-term motor own-damage policy shall have a 30-day free-look period from the date of inception of the policy to enable the policyholder to review the terms and conditions of the policy. The policyholder is entitled to a refund of the premium on a pro-rata basis in the event of exercising the free-look cancellation.
The long-term motor own damage policy can be cancelled during the tenure of the policy either by a policyholder or by the insurer by giving the notice of cancellation. The refund of the premium in such an instance would be:
1. Future Year Premiums - to be refunded in full
2. For the policy year in which policy is cancelled:
a. Where no claims are reported during the year - Refund of pro-rata premium pertaining to the year of cancellation
b. Where claims are reported during the year – No refund of premium
3. GST and other government taxes – refund to the extent permissible from concerned authorities, said Irdai.
“The existing No Claim Bonus (NCB) grid as specified for 1-year Motor Own Damage policies would also be applicable for long-term policies, and the NCB applicable at the end of the policy tenure in case of long-term policies would be same as that would have been earned if such policies were renewed annually. In the case of long-term standalone Own Damage policies issued to be co-terminus with motor third party liability cover, 9 months of policy tenure can be considered a full year for recognition of NCB during the year," said Irdai.
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