[volkman10]

New Policy coverage:

New vehicle owners have to buy long-term cover.

From September 1, buyers of cars and bikes will have to pay entire premium upfront for three, five years.

From September, buyers of new cars and two-wheelers must purchase upfront insurance cover for at least three and five years, respectively. Long-term premium payments would proportionately raise the initial outgo on new vehicles, but save consumers the trouble of yearly renewals

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[saket77]

Originally Posted by volkman10

New Policy coverage:

New vehicle owners have to buy long-term cover.

From September 1, buyers of cars and bikes will have to pay entire premium upfront for three, five years.

This is more like forcing it down the throat rather than making people comply with the rules. This will greatly increase the initial out-go while purchase of vehicles, plus insurance companies will be having a ball since they are getting upfront payments for multiple years. Their cash registers will be ringing.

I understand that this at least makes 3rd party insurance mandatory for at least the first 3-5 years, but most of new vehicle buyers will anyway opt for comprehensive cover at least during the first 4-5 years at least. The problem mainly lies with the older vehicles out of which many are plying without any sort of insurance and that is where the noose should have been tightened. How does this new rule tackles the problem where it actually lies?

Regards,
Saket

Edit: And how will be the NCB calculated?

[sukiwa]

Is this getting enforced from 1st Sept? I saw few adverts, SMS for price increase since 1st Sept and rush for purchase before 31st Aug.

[supremeBaleno]

Originally Posted by Rahul Rao

Even today only third party insurance is compulsary. Own damage is optional, Own damage can be compulsary for vehicles with loan.

As I know it, for new vehicles, for the first year, own-damage coverage is compulsory (plus 3rd party ofcourse). From 2nd year onwards, own-damage coverage is optional.

[hemanth.anand]

Originally Posted by volkman10

New Policy coverage:

New vehicle owners have to buy long-term cover.

From September 1, buyers of cars and bikes will have to pay entire premium upfront for three, five years.

cars have already become so expensive. This will push it further up. Dealers quote around 35K for premium for a car of 9Lakh ex-showroom price(it is much less outside I know) and most of the new car buyers buy the insurance from the dealer with their eyes closed. Now this will increase 3 folds to 1Lakh and that's atrocious.

I bought insurance outside and saved a good amount but still paid 25K for 1st year.
It would've been around 22K for the second year with 20% NCB (I paid much lesser here as I transferred 50% NCB from my previous car).
Probably It'll be 18k for the 3rd year.
The total will be 65K over a period of 3 years.
1. It's a 10K loss (maybe higher NCB will offset this. But...
2. I have to pay 75K Upfront while buying the car itself. that's a 50K increase when buying the new car. I would already have stretched my budget and this may force me to go for a smaller car or a less safer car.

Our people don't do anything unless forced I agree, but this is a bad move for law-abiding, responsible people who actually renew their car insurances duly.

Originally Posted by saket77

Edit: And how will be the NCB calculated?

According to this Article the NCB depends on the number of claims.

[blackasta]

Originally Posted by hemanth.anand

this is a bad move for law-abiding, responsible people who actually renew their car insurances duly.

Attachment 1794573

Agree wholeheartedly. This is outrageous & one eyed decision.

According to the following TOI report, the 3 year rates are actually MORE than what you would have paid for 3 separate years (at the same rate as first year, which is highly possible if we factor in the NCB) for any car over 1000cc engine and any 2 wheeler over 75cc engine.

https://timesofindia.indiatimes.com/...w/65600671.cms

[sandsun7]

Originally Posted by hemanth.anand

Now this will increase 3 folds to 1Lakh and that's atrocious.

As per the IRDA circular, it is clear that the only component that is mandatory for 3/5 years is third party. The insurance companies can offer policies in two ways going forward:
Long-term Package cover offering both Third Party insurance and Own Damage insurance for 3/5 years as the case may be.
OR
A bundled cover with a 3/5 year term for the third party component and a one-year term for the Own Damage.

So the customer gets an option to choose among the two. It is either an increase of nearly a lakh, or around 16.5K (considering a >1500CC car)based on what he choose
Also, the figures mentioned are exclusive of GST. Prices get pushed up further 18% with the addition of GST to these.

[car-dent]

My 2 cents: I think the 3rd party insurance must be made a one time affair just like road tax to be valid for life of the vehicle. There will be no compliance issues after that. The owners can opt for comprehensive yearly insurance separately if they so desire.

[Zappo]

Whenever I see such policies and rules being rolled out by the governing bodies I feel dismay at how we tend to react in a knee-jerk fashion to every impetus. I understand that the genesis of this entire thought process of long term policies started when the courts (I think SC but not sure) observed that how so many vehicles on the roads are running around without even the mandated 3rd party cover and that government should think of ways to get around this problem, if required by even collecting the premium for 3rd party insurance at one go or for a long term.

Now this is the result of that observation! What has it really solved? In my opinion it has not solved anything at all. If anything the IRDA is only pandering to the urge of the insurers to earn more by making such lopsided policies. The logic given by them is that people often forget to get their policies renewed and keep running around without a valid policy. So what will you really get by making 3 year policies mandatory?

If anyone has read the thoughts of some of the insurance company execs as reported by the media, they believe that it is difficult for them because now they need to figure out the extent of the increased exposure to risk due to the issuance of a policy to the buyer. They also need to figure out the possible rise in parts prices and labor costs in the 3 year cover period and then build on it to arrive at the new prices etc. etc. Indications are very clear. The insurance companies have got a new bakra. They will raise all the above bogies and more to justify a huge rise in the premium structure for 3 years coverage period. So it is not even going to be premium on year-1 x 3 but a lot more. Now when you consider that today you probably get a lower premium in the 2nd year if the first was incident free and even further incentives if you had 2 consecutive years of claim free insurance in the 3rd year premium then the losses are even bigger. Besides the higher burden through greater premiums people will also lose out on the opportunity to shift from an insurer for 3 years even if they are not happy with them.

What will all these mean? Only two things. Insurers will gain unjustifiably by raising the bogey of additional risk etc. and in the long run people will avoid getting an insurance even more, the very thing that this policy was actually meant to address. And then where the question of people forgetting to renew policies is concerned, I think such people will tend to have an even higher propensity to forget their insurance renewal after 3 long years of no action on that front!

So was there a solution to the initial problem? Sure there was... Only thing the government needed to do was to ask IRDA to create a central database for the 3rd Party insurance coverage with all the details and make it mandatory for its members (the insuring companies) to log every motor vehicle policy into this system. The system could have easily triggered alerts and reports for further action for every policy that lapsed without a parallel renewal by the same or another insurer for the same vehicle. But then that would have needed some work and would really have meant no real benefit to the insuring companies.

Sorry, but I fail to see any logic behind this new directive!

[fiat_tarun]

This is just like the diesel ban rule, where short sighted decisions are being made. New car buyers are the easiest targets and nothing is being done about the millions of old cars on our roads that do not have any sort of insurance. While the intent is good, it only makes sense if there is a plan to bring existing vehicles under the same policy.

My car is in transit and delivery will be after Sep. 1st. Luckily since I was doing the insurance myself, I managed to get the policy issued right away and can avoid this crazy ruling. Have got it confirmed from the insurer and the dealer that the insurance issuance date is the criteria and not the actual vehicle delivery date.

[krishnakarthik1]

Originally Posted by Zappo

Sorry, but I fail to see any logic behind this new directive!

I think the only and the most simple logic is that the insurance companies' lobby is very powerful and election season is coming up. Plus soon, first private banks and next govt. banks will give you full 100% loan including insurance and no body will really worry about the extra they pay upfront.

Insurance companies will make interest of our money and we will all end up paying more interest to the car loan bank. Beautiful business plan!

[hemanth.anand]

Originally Posted by sandsun7

As per the IRDA circular, it is clear that the only component that is mandatory for 3/5 years is third party.

Yes it's clear. But I'm of the same opinion as saket77. So didn't write it again.

Originally Posted by saket77

I understand that this at least makes 3rd party insurance mandatory for at least the first 3-5 years, but most of new vehicle buyers will anyway opt for comprehensive cover at least during the first 4-5 years at least.

[ninjatalli]

Question to ponder - how much of claims are actually raised against 3rd party coverage for private vehicles? Most of the cases I see on this forum (and outside) fall into two scenarios

• Owner(s) handles the damage cost through a claim under his own (comprehensive) policy coverage
• There's a mutual agreement of a cash transaction and the owner(s) chooses to get the damage repaired through his own policy or through a FNG

Last I checked, the 3rd party claim is still a lengthy process; and at every stage the participants are pushed to go for an offline agreement.

So how and why the push on 3rd party coverage?

[arunphilip]

In my opinion, alongside this ruling it would be good if either the Hon. SC or the IRDA mandate that the third-party insurance is a separate document.

This would allow us consumers to be able to unbundle the purchase of TP and FP insurance, and allow us to purchase FP insurance on a different schedule.

TP insurance is a legal requirement to ply a vehicle on a road, similar to a license and registration.

First party insurance is a separate (and not legally mandated, I think) agreement between the insurer and insured. Whether my car has zero dep cover, or cover for accessories has no relevance to the traffic policeman checking my papers.

Originally Posted by car-dent

My 2 cents: I think the 3rd party insurance must be made a one time affair just like road tax to be valid for life of the vehicle. There will be no compliance issues after that. The owners can opt for comprehensive yearly insurance separately if they so desire.

In all, I think this is the most sensible solution. It is simple and elegant. Just pay for and align the TP insurance alongside the road tax - 15 years at the time of purchase. It will do away with any failure to renew.

The only challenge would be from the insurance companies, who will not like to be locked in to a TP rate that is potentially 15 years old. However, even they need to take a pragmatic view of how many uninsured vehicles (esp. two wheelers) ply our roads, and decide whether potential increase in TP rates over 15 years or 100% coverage of vehicles is financially better for them.

If this option was considered, I'd be eager to know why it was ruled out by the IRDA, and more so the courts.

[greenhorn]

If a car is totaled in the first year, will insurance companies give a refund of the remainder similar to the life tax refund?