Long term motor insurance policies for cars could be on the anvil as insurance companies have sought a nod to sell these products. Currently, such long term products of three years duration are only allowed for two-wheelers.
"We are looking at whether longer duration motor policies for private cars can be offered. Claims have been under control in this segment and long term products will be attractive from a cost perspective," said the head of underwriting at a mid-size general insurance company.
Insurance Regulatory and Development Authority of India (IRDAI) decides the pricing for third-party motor products which are mandatory for all vehicles running on Indian roads. In 2014, it introduced long-term motor third party insurance policy for two-wheelers with a three-year term.
Here, the regulator had said that cost of total cover will be three times the annual TP premium for two-wheelers as decided by the regulator. Motor TP premium is regulated by IRDAI and the regulator brings out revised rates for these policies every year, based on the claims experience.
The regulator also said that the premium would not be revised upwards or downwards during the period of the policy. Further, insurers have also been offering discounts to encourage vehicle owners to have third party insurance for a longer duration.
Two-wheelers have been among the highest percentage of uninsured vehicles running on roads. This is because while customers do purchase a policy while buying the vehicle, they often do not renew it since these policies had yearly renewals.
In segments like commercial vehicles which face incidence of high claims, insurers have said that it is not feasible to have a policy where premiums cannot be revised annually. Loss ratios in motor third party have also exceeded 150 percent meaning for every Rs 100 paid as premium, Rs 150 is paid out as claims.
However, a longer policy would mean you would not need to renew every year nor would you end up paying higher premiums in the next year. There are also talks of bringing out a five-year tenure motor third party product, though discussions are at an early stage.