Car owners may soon be able to insure their vehicles for two years at one time, a move that will help increase premium income for insurers and will benefit customers from lower cost and reduced renewal hassles. Motor insurance is a loss-making business for most insurers because of heavy claims that exceed the premium collected by them.
The Insurance Regulatory and Developmental Authority (IRDA) is looking to provide for a two-year term insurance cover for both commercial and private vehicles that could be increased to five years later, a government official told ET.
A senior official with the insurance regulator confirmed that discussions with both government and insurers were on to extend the period of insurance from one year now.
“There was a suggestion from the government that insurance cover can be linked to the registration and fitness certificate,” he said. The ministry had argued that at present the insurance renewals are not happening in comparison to the claims being reported.
“Their concern is that the premium income is low while the liability ratio has increased so to increase persistency, the period of cover should be increased,” he said. IRDA chairman J Hari Narayan told ET that the discussions are on but at very initial stage. “There are many issues like how the ‘no claim bonus’ should be factored in, and other aspects which first need to be scrutinised,” he said.
If the regulator approves of a long term product, it may be available to both private and commercial vehicles.
A finance ministry official said that a long-term insurance cover will also improve the insurance cover for motor vehicles in the country because many owners do not renew their cover, especially for older vehicles. The ministry has also asked state-run general insurers to set up a working group for analysing their motor portfolio.
“Mostly people in rural areas, specially those using tractors or small utility vehicles do not renew their insurance cover. The idea is if the policy cover is for a longer period and linked with fitness certificate and other details, this will help providing proper insurance coverage at one time,” he said. Private insurance firms are not too keen on the idea of a long term insurance cover.
http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/insurance-regulatory-and-developmental-authority-to-provide-for-a-two-year-term-car-insurance-cover/articleshow/17643744.cms
