Last month, the Honourable Supreme Court passed a judgement which made multi-year, third party motor insurance for cars and bikes mandatory. The decision mandated two years for cars and five years for bikes. Following this, senior officials from the insurance industry have said that consumers may be required to pay 10-12% more in premium amount as the tenure will lead to inflation-adjusted pricing for the products.
Currently, there are insurance policies for bikes that go up to three years, these were introduced with a view to increase the percentage of insured two wheelers, and have a fixed premium for the entire duration of the policy.
Insurance Regulatory and Development Authority of India (IRDAI), the insurance regulatory body, revised premium rates on an annual basis, and while doing so, takes into account the number of claims filed in that category, among other factors. With longer policy tenures, factors and wages will also need to be considered.
Despite third party insurance being mandatory, two-thirds of vehicles plying on Indian roads do not have third party coverage against liabilities that can arise during accidents. Offering long-term insurance will remove the annual hassle of renewing the policy, but a higher sum will need to be paid. Passenger vehicles have very low rate of insurance coverage and the SC verdict is given with a view to increase penetration to acceptable levels.
*Source:Money Control
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