InvestorQ : Why IRDAI has withdrawn long-term package third party motor insurance and how will it benefit/harm the insured?
sanjana Tulsiani made post

Why IRDAI has withdrawn long-term package third party motor insurance and how will it benefit/harm the insured?

Answer
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Niharika Kamble answered.
3 months ago


The Insurance Regulatory and Development Authority in a recent notification has directed that the motor insurance products offering a long-term package for a third party (TP) and own damage (OD) in respect of two-wheelers (5 years) and four-wheelers (3 years) shall stand withdrawn from August 1, 2020. This means that customers shall not be given an option to buy Own damage (OD) covers for a long-term basis.

IRDAI has taken this step keeping in mind the challenges faced by insurance companies and affordability factors in case of many vehicle owners. However, TP (Third Party) insurance shall still be mandatory and therefore, there are not many financial benefits neither to the customers nor to the auto sector.

IRDAI received many complaints stating that OD prices for long-term packages were not regulated and hence insurance companies were charging higher prices than usual. Given this, IRDAI now regulated the OD products by making it mandatory for insurance companies to sell a one-year duration OD cover along with mandatory three-year or five-year TP cover. Therefore, selling of multi-year OD products shall not be allowed from now onwards.