Effective 1st August 2020, long-term insurance policies that had been permitted earlier, stands withdrawn. No long-term package policy may be issued covering any motor vehicle with the exception of the three-year two-wheeler package policy.
The Supreme Court had directed all general insurers to only offer a mandatory three-year third-party insurance policies for new cars and a five-year third party insurance policies for two-wheelers with effect from 1st September 2018. The premium for the long-term policies had to be collected for the entire term at the sale of insurance but would be recognised on a yearly basis.
The authority has reviewed the various options of long term and annual motor insurance covers and following the concerns relating to its implementation, has decided to withdraw the package covers. Actuarial pricing has been a challenge for long term Own Damage cover, and the distribution of package policies has its challenges due to affordability factors for a large section of owners for vehicles.
The possibility of forced selling due to financial interests being linked to loans is high, which gets eliminated with the withdrawal. In case of deficiency of services, policyholders will now have the freedom to change their policy providers, additionally the No Claim Bonus (NCB) structure remains uniform among insurers. Policyholders now will have the option to renew the Own Damage component of a bundled cover with the same or different insurer.