In a major relief to insurance agents and brokers, IRDAI has done away with the long term motor insurance policies having at least 5 year cover for new two wheelers and 3 year cover for new four wheelers.
So far, automobile dealers having distribution license or Motor Insurance Service Provider (MISP) were distributing these long term policies at the time of selling vehicles to their customers. As a result, such policyholders approach intermediaries only after three years and five years to renew their cars and two wheelers respectively.
These policies will be discontinued with effect from August 1, 2020. That means, MISP can continue to sell such policies till July 31, 2020.
In a recent circular, IRDAI clarified, “The insurance regulator has reviewed the various options of long term and annual motor insurance covers now being offered to the prospects/policyholders pertaining to own damage. After a careful examination of the performance of long term package covers and the following concerns relating to its implementation since its introduction in September, 2018, the regulator has decided to withdraw long term package covers offered for three years or five years for new cars and new wheelers respectively with effect from August 1, 2020.”
Here are the key reasons for discontinuing long term policies:
- Insurance companies found it difficult to assess risks and price the product appropriately due to its long term nature
- Distribution of such policies became challenging for some companies
- Instances of forced selling due to financial interest
- Not so robust post sales services
- There was no uniformity among insurers to deal with no claim bonus
