Renewing insurance policies every year can be a tedious task, especially so because most owners forget to renew the insurance policy on an yearly basis. However, this hassle will soon come to an end as the Insurance Regulatory and Development Authority (IRDA) has worked out a three-year version of the third-party liability cover, which will easily replace the annual renewal of insurance policies. The IRDA has further asked insurance companies to come up with new policies offering long term coverage for two-wheelers.
The announcement has encouraged insurers to file three year long term comprehensive policies as per file and user guidelines. In a circular issued to all general insurance companies, the IRDA has stated that the total premium for third-party insurance would be thrice the annual premium and it cannot be changed during the term of the policy. The new issuance of three year policies will also reduce costs in administering and follow-ups for renewals that will lead to lower premiums and cost savings.
While insurance companies are reluctant to renew insurance policies for commercial vehicles due to their high claims ratio, the case is quite the opposite with two-wheelers, as it is not a loss making sector for insurance companies. Third party claims ratio in two-wheelers is less than 100 percent and even insurance companies will not have a problem in issuing long-term policies to customers.
This will be a major boon for insurance companies and owners alike, especially to reduce the number of uninsured two-wheelers on the road. Recent estimates suggest that the compliance of insuring vehicles is high in large cities; the renewal ratio is inversely proportional in smaller towns and villages. Apart from issuing the policy for two-wheelers, there is also a proposal to issue similar long-term policies for cars in the future.