On Tuesday, the Insurance Regulatory and Development Authority of India said that it has withdrawn the Long Term Motor Third Party Insurance Package. The long term motor third party insurance package used to be 3 years for four-wheelers and 5 years for two-wheelers. This long term motor insurance policy will not sell from August 1, 2020.

According to Irdai, distribution of long term third party policies is challenging as it falls heavily on the pockets of most vehicle buyers. Irdai said that in case of long term third party insurance, there is a high probability of forcibly selling the policy and linked insurance and the policyholders thus get an insurance product that does not have the flexibility. Irdai said that the structure of no claim bonus is not uniform among insurance companies and this can lead to dissatisfaction and confusion among policyholders. The insurance regulator also said that actuarial pricing has been a challenge for insurance companies in terms of long term on damage cover.

Now customers will not be given the option to buy long-term damage. Earlier, Irdai had asked the insurance companies to provide customers with the option to purchase a one-year and long-term damage plan. On Damage Cover, the vehicle is compensated for the physical damage, theft, accident and natural disaster. The same, in 2018, the Supreme Court ordered that 5 years the long-term policy will be mandatory for two-wheelers and 3 years for four-wheelers, in order to have a valid cover for vehicles plying on Indian roads. The insurance companies then offered long term policies to the customers.

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