Vehicle insurance companies will design various kinds of insurance policies to fulfill the needs of vehicle owners. Insurance companies will offer products as per the regulations of insurance regular, IRDA (Insurance Regulatory Authority) in India. With the introduction of new regulations in the recent past, general insurance companies should offer compulsory personal accident cover of at least Rs. 15 lakhs
Implications on vehicle owners
- As per new rules, new vehicle registrations after September 1st 2018 should be covered by Compulsory Personal Accident (CPA). Vehicle owners should buy CPA for the first three years.
- The minimum protection offered by the insurance company under the CPA cover is Rs. 15 lakh.
- All kinds of vehicle owners from the smallest scooty to the SUV owners will be covered with a minimum CPA of Rs. 15 lakh.
- Even though the insurance premium payment is burdensome for customers, it will deliver financial protection for the self and family members.
Multi-year third-party insurance policies
- As per the Supreme Court’s order, the insurance regulator has ordered the issuance of multi-year third-party vehicle insurance policy.
- All the general insurance companies should follow the guidelines given by the insurance regulator and should make the availability of new policies to customers.
- The two wheeler insurance will be offered by insurance companies with updated features.
Comprehensive vehicle insurance policy
- There will be complete freedom for insurance companies in designing package policies.
- However, insurance companies should offer a minimum of Rs. 15 lakh as CPA for vehicle owners.
- Insurance companies can offer higher coverage based on the needs of customers.
- The insurance company will go through the monthly/annual earnings of customers and will provide a matching policy as per the proposal received from applicants.
Components of motor insurance
There are two components in a vehicle insurance plan.
- Third –party liability
- Own damage
About one-third of the registered vehicles on Indian roads are not covered by insurance policy. Most of the bike owners will purchase the insurance policy while buying the vehicle and they do neglect in renewing the policy.
Hence, the insurance regulator is insisting upon the issuance of multi-year third-party bike insurance policies. In the coming years, cars will also be covered with multi-year policy.
The third-party policy will not cover your own vehicle’s damage.
It will cover personal accident of a maximum of Rs. 1 lakh for bikes and Rs. 2 lakhs for bikes.
As per the new regulation, all vehicles (both two-wheelers and cars) should be covered by a compulsory personal accident cover of Rs.15 lakhs.
Higher relief for dependents
- If a vehicle owner succumbs to injuries or disability, the insurance company will pay the compensation to the policyholder.
- If there is the death of the policyholder in the road accident, the insurance company is liable to pay the damage to the beneficiary.
- With the sudden demise of a breadwinner in a family, there will be great financial stress in the family. It will be very difficult to overcome the void as it will take many years.
- Before the introduction of the new regulation, the maximum compensation paid to customers was Rs. 1 lakh for bike owners and Rs. 2 lakh for car owners. This is significantly small to fulfill the financial needs of policyholder or dependents.
- On the other hand, a third-party damage is covered by the policyholder’s premium up to Rs. 15 lakh. The great disparity is removed by the insurance regulator as per the Supreme Court’s order.
- Now, all insurance companies should offer Compulsory Personal Accident (CPA) cover and third-party cover. There will not be any concession in this matter to vehicle owners.
- If you are buying a vehicle after September 1st 2018, you should buy CPA for at least. The premium to cover Rs. 15 lakh as CPA is Rs. 750 per annum. You are required to buy for three years. Hence, the CPA for three years will be Rs. 750 x 3 = Rs. 2250.
- The new regulation will be heavy on the pockets of customers.
- The vehicle maintenance cost will also increase.
- If the vehicle owner sells the vehicle after one year, the insurance policy will also be transferred to the new owner. However, the necessary documentation should be completed by the new owner in this direction.
Option to subscribe higher CPA
- It is not only a hike in the mandatory CPA premium but also the ability to purchase higher CPA cover is made feasible with the new insurance regulation.
- Insurance companies should offer various alternatives to customers in buying the insurance coverage
- The mandatory Rs. 15 lakh coverage is the basic across all kinds of vehicle insurance policies. It should be offered to the two-wheeler as well as the bike.
- Now, customers can buy CPA cover up to Rs. 50 lakhs by paying an extra premium.
Impact on old or aged vehicles
- As per the new policy, insurance companies will compulsory third-party and personal accident cover for new vehicles
- However, the aged vehicles may not be covered by the insurance
- They should be motivated to buy the policy in the best interests of their families.
- Most of the vehicle owners forget or ringlet about the renewal of the insurance policy in spite of the regular follow up and reminders sent by the insurance company
Impact of new regulation on new buyers
There are three options for new vehicle buyers.
- Option I – You can buy a third-party liability policy for 3 or 5 years
- Option II – You can subscribe to package policy for 3 or 5 years
- Option III – A bundled policy of 3 or 5 years and a one-year subscription to own damage.
If you buy a policy under Option I for 5 years, you should want to stick with the same insurance company for 5 years. You will be able to switch over to another insurance company after 5 years.
In the coming years, insurance companies are likely to offer Own Damage policies to fulfill the interests of customers.
Impact on IDV
- The IDV (Insured Declared Value) will not be affected as per the new regulation.
- The insurance company will fix the IDV as per the invoice price and make & model of the vehicle.
- The IDV will change while renewing the policy as the insurance company will adjust the depreciation
Impact on NCB
- The vehicle insurance company will calculate the NCB on the Own Damage portion. It is not based on the Third Party premium.
- As per the new rules, the NCB will be applied after 3rd or 5th as per the term of the policy
- We will get more information about the application of NCB discount while renewing the policy in the coming days
- The new rule is applicable for cars and two-wheelers which are purchased after September 1st For other vehicles, the insurance premium can be paid on annual basis without any issues.
Impact on premium
For new cars and two-wheelers, the impact on premium will be huge.
CPA should be purchased for at least 3 years.
The own damage premium will be based on the cubic capacity of the bike or car. If the CC of the vehicle is high, the insurance premium will also be high.
For small cars, the insurance premium will be in the lower range and for big cars with large engines, the insurance premium will be high.
Tips to save the premium
To cut down the premium, vehicle owners should follow the safe practices and should renew the policy on or before the due date.
- Installation of safety devices – If you install a safety device approved by the insurance company, you will get a discount on the premium. The vehicle’s risk of theft will decrease with the installation of safety devices.
- Online policy – You can buy a new policy online without consulting the agent. Insurance companies will offer a discount on the premium when you renew or buy a policy online. The insurance companies can reduce administrative expenses and the rewards will be passed on to customers.
- Nil depreciation – To get better protection and coverage, you can subscribe to ‘nil depreciation’ The insurance company will not apply NCB bonus if you claim the policy. You can subscribe to additional NCB rider so that the NCB will be protected.
- Assess your insurance needs – The insurance needs should be assessed and you should buy the right type of vehicle. As the insurance is mandatory throughout the life of the vehicle, you can choose a standard and proven model for which the insurance premium will be low. Insurance companies will charge a higher premium for luxurious or sports vehicles.
Conclusion
There will be a hike in insurance premium for all new vehicles registered on or after September 1st 2018. CPA premium will be included for the first three years for a 3-year policy to offer Rs. 15 lakh personal accident for the vehicle owner.
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