Purchasing new vehicles could cost up to 10% more in the coming months as India’s insurance industry — on the back of an order by Madras High Court last week — is being forced to revamp policy designs and existing risk models of motor covers.
As per a Madras HC landmark judgment, vehicle owners now have to purchase mandatory ‘bumper to bumper cover, which means that along with the compulsory third-party insurance policies, consumers would also have to purchase motor own-damage (OD) insurance, as well as accident covers for co-passengers.
Insurance industry sources say that the new comprehensive motor package, which would be offered at dealerships, could be at least three times the premium of the current third-party prices. They said that the industry is in active dialogue with sector regulator IRDA to understand the specifics of the new rules as well as to understand compliance timelines.
“This is a landmark judgement in that it will ensure a significant increase in penetration of insurance in India just like the earlier order to make third-party motor insurance mandatory,” said an industry official. “The industry has met the regulators as well as seeking legal opinion on the enforcement of the new rules. There will be a significant revision in pricing as claim events are certain to go up, as well as the five-year lock-in period makes it tough to judge the impact on loss ratio for insurers,” the person added, requesting anonymity.
Own Damage is an insurance cover that protects you against the loss and damage that occurred to your own vehicle like fire, theft, etc. Third-party covers are those which cover liability on damage to other vehicles in the event of an accident. Currently, only third-party covers are mandatory during the time of vehicle purchase, while OD with accident riders has largely been a complimentary product.
Source: Economic Times