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Motor insurance: Clarity missing on own damage cover renewal

Individuals may have to wait till third party cover expires; IRDAI to clarify.

November 29, 2018 / 02:36 PM IST

A clause in the the new motor insurance norms, which came to effect in September, is turning into Achilles Heel for vehicle owners and insurers alike.

The insurance regulator has given vehicle owners the option to choose between a one-year and a multi-year own damage (OD) cover to the customers, but has prohibited purchase/renewal on a standalone basis. Thus car and bike owners who have bought a one-year OD motor insurance cover after September 1 for new vehicles may not be able to renew their covers for the next two or four years, respectively.

The law states that individuals cannot buy an OD cover as a standalone product but as a package product with a third-party motor cover. So, if an individual has bought a one year OD product and three-year bike insurance, he/she will have to wait till the TP (third-party) product is up for renewal.

After the Supreme Court directed insurance companies to offer three-year and five-year third party motor insurance, Insurance Regulatory and Development Authority of India (IRDAI) asked insurers to offer these products. Initially, insurers were told to offer comprehensive covers for the entire duration and IRDAI later said that an option could be provided to customers.

What's own damage cover?

  • Own damage covers will protect your vehicle from any external damage

  • It can be either bought for one-year or multiple years

  • It cannot be bought as a standalone item, has to be clubbed with third party insurance

  • Third party insurance will pay financial damages if your car/bike is involved in an accident leading to death/injury to others

  • If you buy 1-year OD cover, renewal can be done only after TP cover expires

Comprehensive covers consist of motor own damage and motor third party cover. Third party insurance is mandatory as per the Motor Vehicles Act and protects vehicle owners against financial liabilities due to accidents involving their car/bike. The money from insurance here is paid to the affected parties. Own damage on the other hand, covers the vehicle from any damages while being driven on the roads. However, this is not a mandatory cover.

Close

Insurance companies are seeking clarification from IRDAI on how the renewals of the OD products will be initiated. Till that time, it will be a long wait to insure their own vehicles against external damages.

IRDAI is likely to offer a clarification on this issue in the next few weeks.

Automobile companies had raised concerns about the insurance prices playing a spoilsport in vehicle sales.

Due to the SC order, third party motor premiums rose between 2.5 to 5 times for new cars and bikes purchased after this September 1. Adding multi-year OD covers would have led to price increase between Rs 5,000-15,000 in the overall vehicle price which auto companies termed detrimental to sales.

Motor insurance constitutes 50-55 percent of the overall premiums written annually by general insurance companies.
M Saraswathy
first published: Nov 29, 2018 02:36 pm

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