The Insurance Regulatory and Development Authority or IRDA is contemplating to provide for motor insurance policies having two years terms for both commercial and private vehicles. This will reduce their renewal hassles. At the same time it will augment the income through premiums for insurance providers.
IRDA is an autonomous statutory body enacted under the act of Parliament. It has a duty to promote and regulate insurance and reinsurance business and to protect the interest of and secure fair treatment to the policy holders. Further Indian Insurance Companies are regulated by the terms and conditions of IRDA. It also monitors and implements quality competence and fair dealing of the insurance companies and ensures that the insurance companies are providing the precise and correct information about the products offered by them to the customers.
It should also be noted that auto insurance is largely a loss incurring insurance segment for many insurance companies owing to the high claim ratio, which surpasses the car insurance premiums collected by the insurers. Mr. J Hari Narayanf Chairman, IRDA told that the plan is under initial stage and various factors like ‘no claim bonus’, etc should also be factored before finalizing the plan.
A senior official from IRDA confirmed that discussion with the government is under progress to extend the period from one year to two years and later on gradually it can be increased to a term of five years. He further said that government has put forward the suggestion to link insurance cover to the registration and fitness certificate. He also emphasized that Insurer’s has a concern that since liability to premium ratio has increased, so in order to continue steadily despite problems, the period of coverage should be increased.
According to the spokesperson from Finance Ministry, a long term insurance cover will progress the insurance cover for motor vehicles in the country as many owners do not renew their insurance, in particular for older vehicles. He also added that mostly in rural areas, people using tractors and other small utility vehicles do not renew their insurance cover and the idea is if the policy cover is for a longer duration and linked with registration and fitness certificate, this will help to provide proper insurance coverage at one time.
For this, the Ministry has also asked the insurer to set up an operational group for study their motor portfolio. However private insurance companies are not enthusiastic with the proposal of long term insurance coverage.
