IRDAI Withdraws Long-Term Package Third-Party Motor Insurance


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Long-term package motor insurance products that offer third party (TP) and own damage (OD) for two-wheelers (five year policies) and four wheelers (three years) will be withdrawn from August 1, 2020.

The insurance regulator (IRDAI) said in an order that the distribution of package policies has its challenges due to affordability factors for a large section of vehicle owners.

This means that customers won't be given an option to buy OD covers for a long-term basis. This is an extension of an earlier order by Insurance Regulatory and Development Authority of India (IRDAI) order where it had asked insurers to give customers an option to choose between one year and multi-year OD plans.

For customers and auto makers trying to attract buyers, there is not much of a financial benefit because the multi-year TP insurance is still mandatory. TP insurance covers financial liabilities of car/bike owners in case the vehicle is involved in an accident causing death/injury to a pedestrian or person(s) in another vehicle.

What this means is that insurance companies can only sell one-year duration OD cover along with the mandatory three-year or five-year TP cover. Multi-year OD covers will not be permitted.

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