Motor insurance in 2019: Hike in third party premiums and penalties

By Sajja Praveen Chowdary  

Considering the various developments in the ecosystem as well as in technology relating to motor vehicles, the Insurance Regulatory and Development Authority of India (Irdai) brought in numerous changes in its existing products and insurance policies. The guidelines issued in the year 2019 made motor insurance policies better and simpler.

Here’s a quick look at some of the important regulations issued by the insurance regulator.
Increase in third-party premium
The regulator has been notifying the premium rates for Motor Third Party (TP) Liability Insurance, every year, starting from 2011. From June 16, 2019, for private cars not exceeding 1000 cc the annual TP premium was raised from Rs 1,850 to Rs 2,072, and for private cars of 1000-1500 cc capacity, the premium was raised from Rs 2,863 to Rs 3,221. However, the TP premium for private cars exceeding 1500 cc remains unchanged at Rs 7,890.

For two-wheelers, TP premium was increased for first three vehicle cc slabs while the last slab remained unchanged. For bikes not exceeding 75 cc the premium was raised from Rs 427 to Rs 482.

Increase in penalty on driving without insurance
According to the new Motor Vehicles Act, which came into force from September 1, the penalty on driving a vehicle without valid motor insurance has been increased to Rs 2,000 for the first offence and a fine of Rs 4,000 for the second offence with the possibility of being jailed for three months on all occasions. The increase is a jump of 100% as the earlier penalty was Rs 1,000. In total, 63 new clauses were introduced which includes increase in penalties for drunken driving, driving without licence, speeding or racing, red light jumping, disobedience of orders of authorities and many more.

Revisiting the product structure
In November, the regulator brought out an exposure draft on making motor insurance policies simpler. There are various changes suggested in the draft that affect the consumers in a very positive way such as defining sum insured—value to be paid to the customer in case of total loss of vehicle, depreciation to be followed in case of claims (vehicle parts), coverage of engine damages due to water ingression and consumable items such as engine oil, nuts and bolts in case of a claim.

Under the proposed draft, the sum insured is expected to be the invoice value for the initial three years and depreciation would happen upon invoice value post the third year and not on the ex-showroom price as done earlier. As per the new guidelines, anything and everything will have a depreciation value. Different parts having different deprecation may be ruled out completely and all parts will have same depreciation, i.e., till 1st year – 10%, till 2nd year – 20%, till 3rd year – 30%, till 4th year – 40% and till 5th year—50%.

The regulatory body even initially plans to allow usage of telematics in the motor insurance industry as it plans to allow the concept of pay as you drive and pay how you drive. In its latest exposure draft, it has made it clear that the Insurance Information Bureau of India will act as a data depository and will store and own the data. The regulator even plans to help insurers to keep a check on fraudulent elements through Cancellation of RC for total loss cases, claim intimation within 24 hours and mandatory deductible linkage to sum insured.

The writer is business head, Motor Insurance, PolicyBazaar.com

Source: Financial Express