To understand this latest announcement from the IRDAI, we will have to first go back to September, 2018. This is when the IRDAI issued an announcement in line with a Supreme Court mandate, stating that all general insurance companies would have to offer potential customers with 2 coverage options; long-term comprehensive cover for 3/5 years (for cars/bikes) or long-term (3/5 years) third party insurance with one-year own damage cover.
However, on Tuesday (10th of June, 2020) the Insurance Regulatory and Development Authority of India (IRDAI) went back on this decision and asked all insurance companies to withdraw long-term comprehensive plans.
What this means for you?
This means that, from the 1st of August, 2020 you can no longer purchase long-term comprehensive bike or car insurance. You can only purchase long-term third party insurance and one year of own-damage cover. So while your third party cover would stay valid for 3 years, you would have to renew the own-damage component of the plan every year.
Why did the IRDAI withdraw long-term comprehensive cover?
There are quite a few reasons why the IRDAI has pulled the plug on long-term comprehensive car and bike insurance plans. One of the first reasons was the cost of these plans. The cost of comprehensive bike or car insurance for one year itself is quite expensive – imagine paying for 3/5 years upfront?
The other issue was the potential of forced selling of long-term comprehensive plans. These plans were obviously more profitable and were often forced on to customers at dealerships. Another big issue was the lack of flexibility – once you purchased a long-term comprehensive car or bike insurance, you were tethered to that insurance provider for 3 or 5 years! You were stuck with the plan, even if you were not satisfied with the cover.
The last issue with long-term comprehensive car or bike insurance was related to the aspect of NCB. There was little or no uniformity in the way different insurance providers applied your NCB benefits. This often resulted in confusion and disappointment for the policyholder.
To alleviate all of these issues, the IRDAI as withdrawn long-term comprehensive bike and car insurance plans. Now, you are mandated to buy long-term third party insurance on the purchase of a new car or bike. If you wish to include own-damage protection, you will be offered only single-year plans which will have to be renewed every year.
Therefore, if you are planning to buy a new car or bike after the 1st of August, 2020 remember to be aware of your options. You can choose to buy a bundled product that consists of a long-term third party insurance and 1 year of down-damage cover. You could also opt to purchase third-party insurance & own damage cover separately from two different insurance companies.
We hope this article has been helpful for you and has helped you understand the IRDAI’s latest announcements about long-term comprehensive car & bike insurance. Good luck and ride/drive safe!