Soon, you may have to buy a mandatory three-year motor third-party insurance for your car. For two-wheelers, the required term could be up to five years.
The Insurance Regulatory and Development Authority of India (IRDAI) is currently working on the modalities, and a decision is likely in a month, according to a senior official.
At present, buying a one-year policy is mandatory at the time of vehicle purchase, after which it must be renewed. The insurance pays for legal liability in case there is injury or damage to a third party or property caused by the use of the vehicle in a public place. Driving a vehicle without one is an offence under the Motor Vehicle Act, 1988.
The IRDAI sprung into action after it received a directive from the Supreme Court last year to make a three-to-five-year term mandatory. In January, the regulator had directed all general insurers to sell third-party cover online along with other regular channels. It also advised insurers to liaise with the police to facilitate issue/renewal of third-party policies.
“It’s a positive step; we support and welcome this move,” Sasikumar Adidamu, Chief Technical Officer, Bajaj Allianz General Insurance, told BusinessLine .
For the customer, a longer-term policy offers more price stability than an annual one. It will also help increase insurance penetration, added Adidamu.
Not without challenges
However, renewal remains a challenge, even if needed less frequently.
Product pricing is the second challenge, since the inflation for a longer term has to be considered. IRDAI will determine the prices with inputs from the industry.
It is estimated that 40-50 per cent of vehicles are plying at present without third-party cover. How the new rule will affect compliance is to be seen.
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