All motor insurance policies come with a depreciation clause, which stipulates that the insurer will deduct a sum at the specified rate on the components replaced or materials added at the time of repairs after an accident. “The depreciation quantum is dependent on the type of parts replaced or materials added, besides the age of the vehicle. However, at this moment, insurance companies don’t deduct the depreciation element from the painting charges, and painting-related claims are fully reimbursed. Since there is no uniform practice prevailing in the market for depreciation on painting, Insurance Regulator IRDA announced the inclusion of vehicle paint under the purview of depreciable part and fixed rate of depreciation for the same.
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.
In a statement IRDA stated that ‘In case of painting, the depreciation charge of 50% will apply only on the material cost component of the total painting charges’. It also added that in case of a consolidated bill for painting charges, the material components shall be 25% of the painting charges for the purpose of computing depreciation. IRDA is of the view that paint is manufactured from polymer; it should be included in the group of plastics and hence fixed 50% rate of depreciation on vehicles older than 10 years.
The effective date of change shall be 1st February 2013 and shall be applicable to all motor vehicle policies whose risk starting date falls after the said date.
IRDA has proposed to general insurers to make the above changes in individual package policy in their policy contracts.so that the policy holders are made aware and there are minimum complaints.
