Freedom from annual renewal of motor policies(?)

Annual renewal of motor insurance is cumbersome and the statutory nature is only reason as to why most people renew it year after year. Many people have expressed their desire and need for long term motor policies. Policies like Householder’s Suraksha can be taken as long term policies depending upon your requirement and often has long term discount benefits. So, why not a motor policy?

On 12^th August 2014, IRDA-Insurance Regulatory and Development Authority of India has given the green signal for 3 year motor policies for two wheeler vehicles. As of now this facility is open only for Third Party Cover for 2 wheelers. Third Party cover is compulsory in India under the Motor Vehicles Act, and Own Damages cover that majority of us take is optional in nature. Third Party policies cover liabilities towards third party life and property damages only.

The circular from IRDA states that Own Damage policies have to be renewed every year. And these long term third party covers can be cancelled only in the case of total loss to the vehicle. The premium charged by insurers for the three-year motor insurance contract will be thrice the annual third-party motor insurance premium for two-wheelers as prescribed by the regulator. IRDA has given insurance companies the go ahead to come out with long term Comprehensive policies -Third party as well as Own Damages. So that can also be expected in the near future.

This move definitely would reduce the operational cost of the insurance companies. It would make the auto dealers very happy that they would get the customer locked for 3 years. Does it mean that the premium would not change during this period? It is not clear how insurers would adjust loss if there is a claim or adjust bonus if there is none.

Now the question that needs to be asked is whether one is comfortable with the higher outflow of three years premium in one go to reduce the hassles behind yearly renewal of the policy? The flipside is that remembering to renew your motor insurance once in three years is going to be harder than every year. There is a very high level of chance that your policy may expire and you may remember its renewal only after an incident has occurred. Even otherwise, forgetting to renew the policy before its expiry means submitting your vehicle for inspection which is going to take toll on your time.