Mumbai: Effective September 1, motor vehicle owners would be able to buy a standalone annual "own damage" cover. This will be applicable for cars and two-wheelers, both old and new, insurance regulator IRDAI said.
For issuance of standalone own damage (OD) annual cover as well as for renewal of the OD component of a bundled cover, insurers will have to ensure that the cover is offered only if a motor third-party (TP) cover is already in existence or is taken simultaneously.
The insurer needs to mention the start and end date of TP policy while issuing an OD policy.
In an order last year the Supreme Court had instructed insurers to provide long-term, three-year motor third party covers. However, buying a three-year motor own damage cover along with TP was proving too costly for policy buyers. Now a car or bike buyer has the choice to buy own damage separately for one year or more.
Pavanjit Singh Dhingra, Director, Prudent Insuran-ce Brokers, explained, "Due to the Supreme Court order, the insurance industry had to provide three-year TP insurance. For buyers of comprehensive insurance, buying three years own damage along with the three-year TP cover would mean a great deal of financial burden. Therefore, the IRDAI allowed insurers to offer three-year year TP with one and three-year own damage options."
According to a senior insurance official, for a vehicle with an engine capacity exceeding 1500 cc, the OD premium rates are around 2.5 per cent of the sum insured here against 5 to 6 per cent in advanced countries. This is because after de-tariffing of the non-life industry in 2007 in India, insurers have been competing on price to grow their topline.
While motor "own damage" policies are optional, the third party cover is mandatory for all vehicles, except for government vehicles. The OD component covers natural calamities, theft, fire and the like.
Currently insurers have to offer bundled policies (motor OD and TP combined) to vehicle owners. From September 1, the issuance of bundled policies for cars and two-wheelers will not be compulsory.
Long-term standalone OD policy will not be permitted for now, said the IRDAI. It said policyholders would have the option to renew the OD component of a bundled cover falling due on or after September 1 with the same insurer or a different one. Here, the pricing of OD will be the same as that being offered in the package policy....