IRDAI has introduced some changes in the duration of motor insurance policies. As per the latest circular issued by IRDAI, it has been proposed that both two-wheeler and four-wheeler third party motor insurance policies would be offered for long tenures. While two-wheeler third party policies should be offered for a continuous period of 5 years, the duration of long-term four-wheeler third party policies is proposed to be 3 years. This move by the IRDAI has been taken to increase motor insurance penetration which, currently, is below 50% despite the policy being legally mandatory. Both the insurance company and the policyholders are meant to be benefitted by this move. According to IRDA’s directives, policyholders can expect the following benefits –
- Stable insurance rates over the said duration
- Wider net or insurance protection as more and more individuals opt for the plan
- Decrease in premium rates when increase in the number of policies widen the risk pool
- No hassles of annual renewals
For the insurance companies, these are the potential benefits –
- Increase in the number of policies mean increase in insurance penetration and higher premium collections
- Increase in customer base would result in better claim experience
So, IRDA has proposed insurance companies to adopt the new directives and offer long-term duration in third party motor insurance policies.
Did you know That the surrender value of your insurance policy can be taxed?
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