IRDA Guidelines for Motor Insurance

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The Insurance Regulatory and Development Authority (IRDA) has formulated guidelines that have to be adhered to, by any general insurance company offering motor insurance policies in India. Customers have to avail motor insurance policies only from companies registered with the IRDA. Motor insurance widely encompasses private car insurance, two-wheeler insurance, commercial vehicle insurance and all other types of road transport vehicles. In India, it is mandatory to own a motor insurance policy for any type of vehicle. This is because driving a vehicle without a valid insurance plan is a punishable offence as per the Motor Vehicles Act, 1988. A certificate of insurance will be issued apart from the policy by the insurer according to Rule 141 of Central Motor Vehicle Rules 1989, when a motor insurance policy is availed.

IRDA Guidelines for Motor Insurance

What does Motor Insurance offer?

A Motor Insurance policy offers comprehensive coverage to the policyholder against the following -

  • Damages to the insured vehicle,
  • Compensation for Third Party Liability against the vehicle owner inclusive of Third Party Property Damage

Types of Motor Insurance policies in India:

Insurance companies across the country offer two types of motor insurance covers for vehicle owners -

a) Liability Only Policy - Third Party liability insurance is mandatory for all registered vehicles in India.

If a customer chooses a Liability Only Policy, then vehicle damages will not be covered by the insurer.

b) A Comprehensive Package Policy - Protection against damages to the vehicle plus the Liability Only Policy.

A Package Policy would offer a car owner wider coverage for their insured vehicles.

Coverage under any Motor Insurance policy in India:

Damages occurring on any vehicle due to the following natural and manmade perils are covered -

Natural Disasters/Perils Other types of perils
Fire Theft / Burglary
Lightning Housebreaking
Earthquakes Floods/Cyclones/Storms/Tempests/Hurricanes/ Frost / Hailstorm / Inundation Explosion
Rockslides / Landslides Self-Ignition
Strikes / Riots / Terrorism/Malicious Acts
While the vehicle is in transit through any means of transport
Accidental External Sources

Exclusions under any Motor Insurance policy in India:

A Motor Insurance policy taken from any insurer in India will come with certain exclusions and will not offer coverage for the following -

  • Individuals driving without a valid driving license or under the influence of alcohol, drugs and other intoxicating drinks.
  • If the accident has taken place outside the geographical area covered under the policy
  • Mechanical or Electrical breakdowns in the vehicle and
  • If the insured vehicle has been used for any unlawful reason.

Sum Insured for a Motor Insurance Policy:

The sum insured is determined for Own Damage coverage as given below -

The insurance company will determine the sum insured according to the current value of the vehicle as per the manufacturer and the depreciation value depending on the age of the vehicle. Here, the sum insured is the value for which the vehicle has been insured and is known as the Insured Declared Value (IDV).

The sum insured is determined for Third Party coverage as given below:

For third party coverage the sum insured is determined as per the Motor Vehicles Act, 1988 and also includes a mandatory personal accident cover for the car owner. The motor insurance policy can also be taken with inclusions like workmen’s compensation for the driver, personal accident coverage for co-passengers, etc.

Customer Turnaround Times as approved by the IRDA:

Issuance, processing and Cancellation of policies 15 days
Issuance of proposal copy 30 days
Services after issuance of policy/ Refund of proposal deposits/ Non-claim requests 10 days
Submission of survey report 30 days
Addendum Report for the insurer 15 days
Claims - settlement/rejection after the addendum report has been received 30 days
Acknowledgement of a grievance 3 days
Resolution of a grievance 15 days

Determination of Premium for a Motor Insurance Policy:

There are multiple factors that affect a motor insurance policy premium in India. Different insurers charge different premiums for Own Damage cover. Customers must compare and choose a policy with an affordable premium. The premium will be higher if the customer opts for lower deductibles. Some of the common aspects considered to determine the premium amount for a customer is as follows - Vehicle class, Registration details along with the Engine number, chassis number, seating capacity, cubic capacity, fitness certificate, tax payment details, owner/driver details like gender, age, license validity, qualifications, insurance history, etc. The premium is calculated as per the prevailing rates in the city where the vehicle has been registered.

Premium for Own Damage coverage is decided by the insurance company after approvals from the Insurance Regulatory and Development Authority. Here, the premium will vary based on the following factors - Vehicle Age, Discounts offered by the insurer, loading, past claims, IDV, etc.

Premium for Third Party coverage is determined by the Insurance Regulatory and Development Authority. If there is any insurance breaks, then an inspection has to be conducted and additional charges have to be borne by the policyholder.

If existing motor insurance policyholders add CNG or LPG kits in their vehicles, then the (Road Transport Authority (RTA) office has to be informed to make changes in the registration certificate. The insurer also has to be intimated to include the extra premium that has to be paid for the CNG/LPG kit.

In order to lower their motor insurance premiums, customers can opt for No-Claim Bonus benefits and also get extra discounts for Own Damage and Third Party policies.

Own Damage Premium discounts can be got if -

  • Customers are members of the Automobile Association of India,
  • They own Vintage Cars as certified by the Vintage and Classic Car Club of India
  • They install anti-theft devices in their vehicles as approved by ARAI - Automobile Research Association of India and the Automobile Association of India.
  • Special concessions for modified vehicles for handicapped, blind and mentally challenged individuals.
  • They choose additional voluntary deductibles or excesses.

For the Liability Only Section, insurers will give discounts on the reduction of Third Party Property Damage from Rs. 7.5 lakhs to Rs. 6,000.

No-Claim Bonus (NCB) in Motor Insurance:

Policyholders can enjoy the No-Claim Bonus benefits just as the name suggests, when they have not made any claims for an entire policy year. As per current norms, the NCB varies from 20% for Own Damage premiums and increases to a maximum of up to 50%, if there are consecutive claim-free years. If the customer makes a claim, then the No-claim benefit is lost for the succeeding policy year. This NCB benefit is offered to the insured individual and not on the vehicle and hence cannot be transferred to the new owner when the vehicle is sold. Customers can transfer their No-claim benefits from one insurer to another during renewals by producing the adequate proof showing the entitlement of NCB.

Motor Insurance Policy Tenure in India:

Any Motor insurance policy is generally valid for one year after which it has to be renewed by the due date. Grace periods are not offered on premium payments. If the policy is not renewed on time, then the insurer might conduct an inspection before renewing the policy. Additionally, if renewals are not done for more than 90 days for a comprehensive motor insurance policy, the customer might lose the No-Claim Bonus benefit from the insurer.

Deductibles in Motor Insurance:

A deductible is an amount that is paid over and above the claim amount. Deductibles come in two types - Voluntary and Compulsory Deductibles or Excesses. Compulsory excesses are different based on the type of the vehicle insured, varying from Rs. 50 for two-wheelers and Rs. 500 for commercial vehicles and private cars. This is determined based on the cubic capacity of the insured vehicle. Some insurers might also levy additional excesses depending on the vehicle age or if there are more claims being done.

Documents Required to Be Kept in Insured Vehicles:

  1. Certificate of Insurance
  2. Pollution under Control Certificate
  3. Driving License - photocopy
  4. Registration Certificate - photocopy

Documents to Be Submitted While Making Motor Insurance Claims:

  1. Filled-in Claim Form
  2. RC book of the vehicle
  3. Estimate of Loss - Original
  4. Repair Invoice - Original
  5. Payment Receipt

For cashless settlements - Repair Invoice and FIR (if required)

For theft claims - Non-traceable certificate/ Keys of the stolen vehicle

GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017

IRDAI instructs motor insurers to discontinue advertisements of unrelated services

Insurance Regulatory and Development Authority of India (IRDAI), the insurance regulator of the country, has recently directed the motor insurance providers to stop the advertisements of services which are not related to the insurance covers.

The regulator has instructed the discontinuation of ads such as free pick-up and dropping services for the vehicles. These services are not part of the insurance cover and are therefore being asked to stop.

25 May 2022

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