Come September 1, there will be long term motor insurance policies available for policyholders.
In its recent circular, IRDAI has asked insurance companies to issue long term motor insurance policies having at least 5-year cover for two wheelers and 3-year cover for four wheelers. Insurers will have to issue these policies at the time of sale of new vehicles.
However, it is not clear if such policies are applicable for the existing vehicles due for renewals. Experts believe that this long term policy is also applicable for existing policies due for renewal.
With this, IRDAI has introduced six new categories under long term motor insurance policies for your clients.
- 5-year third party insurance for two wheelers
- 3-year third party insurance for four wheelers
- 5-year comprehensive policy that comprises own damage cover for two wheelers
- 3-year comprehensive policy for four wheelers with own damage cover
- Bundled policy with 1-year comprehensive and 5-year third party cover for two wheelers
- Bundled policy with 1-year comprehensive and 3-year third party cover for four wheelers
On commission structure of agents, brokers and motor insurance service providers (largely automobile dealers), IRDAI has clarified that insurance intermediaries can get up to 17.5% of the first year premium of five-year two wheelers comprehensive motor insurance policies.
Similarly, general insurance can pay up to 10% commission on the second and third year premium and 5% commission on fourth and fifth year premium of the policy.
In case of three-year motor insurance comprehensive policy of four wheelers, IRDAI has capped first year commission at 15% on own damage cover. Subsequently, non life insurers can pay up to 10% and 5% of commission on second year and third year premiums respectively.
On bundled policies, intermediaries can get up to 17.5% and 15% commission on five-year bundled policy for two wheelers and 3-year bundled policy for four wheelers, respectively.
However, this commission structure is applicable only on premium charged towards ‘own damage’. Premium of comprehensive motor insurance policies has two components – third party and own damage.
Remember that there will be no commission on third party motor insurance cover for both 5-year two wheelers and 3-year four wheelers.
IRDAI has also asked insurance companies to incentivize these distributors with up to 30% of commissions as rewards.
