Home / Money / Personal Finance /  You can no longer buy a long-term comprehensive motor insurance cover

The Insurance Regulatory and Development Authority of India (Irdai) on Tuesday asked all insurers to withdraw long-term packages offering both third party (TP) and own-damage (OD) motor insurance policies starting August.

In September 2018, Irdai in line with the Supreme Court’s mandate had asked general insurers to offer two options for motor insurance to potential buyers. They were asked to either offer a long-term comprehensive cover comprising both third party (TP) and own-damage (OD) insurance for three years or five years, or a bundled cover for three or five years for TP component and one-year OD cover.

A three-year TP cover was mandated for cars and five-year TP cover was mandated for two-wheelers. Tuesday's decision means that you can now buy a long-term TP cover but will have to renew the OD component every year.

For cars, consumers can buy three-year TP only or a three-year TP with a one-year OD cover.

In its circular, the regulator cited affordability of long-term policies, potential mis-selling, policyholders being confined to the same insurer and non-uniform no-claim bonus (NCB) structure as the reasons for withdrawing the provision.

“Affordability was a problem. It’s unrealistic to buy five+five or a three+three construct because it’s quite expensive for someone to pay upfront. The uptake for this was quite low too. And in some instances, such long-term comprehensive products have also been forced to the customer. The other issue is, once you buy such a policy, you’re stuck with the insurer for five or three years," said Animesh Das, head of product strategy at Acko General Insurance Co. Ltd.

Calculating the NCB benefit also became confusing for insurers. If you have a three-year policy, you get the NCB benefit all at once when you renew the policy during the fourth year and not every year.

“In a long-term policy, you lose the yearly NCB benefit, which you would’ve otherwise got had you opted for annual renewal," said Naval Goel, CEO and founder,, an online insurance marketplace.


For potential buyers who may be unaware of the option to buy OD cover on an annual basis or from a different insurer, this could have been a cause for mis-selling. With this move, Irdai has tried to put an end to this.

“This is a welcome move. Policyholders will not have to shell out a huge chunk of money or get stuck with an insurer they are unhappy with. These guidelines lend more clarity to customers and avoid exploitation of any loopholes that may have been happening," said Das.

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