The motor insurance space is set for a significant overhaul. The Insurance Regulatory and Development Authority of India (IRDAI) has announced a slew of measures that are expected to change the motor insurance landscape of India. Here, we discuss some of the regulator’s announcements and their impact on policy holders.

 Insurance premium linked to driving habits

Your motor insurance policy’s premium will now be determined by your driving habits. If you drive well and avoid traffic violations, your premium will remain low. But if you get penalised for bad driving, your motor insurance premium will go up, according to an IRDAI order dated September 6. “The intention of the insurance regulator is good when we see the proposal to link motor insurance premiums to traffic violations; however, the implementation may not be an easy task given the lack of infrastructure,” said Saroj Satapathy, executive director-insurance broking, Salasar Services. The regulator has ordered insurance companies to undertake a pilot project in the National Capital Territory, Delhi to implement the premium escalation formula.

“This is a forward-looking move. To ease implementation, we would first need to facilitate a national repository of traffic violations. Also, in the case of paid drivers, we need to find a way to link the drivers to the cars,” says Abhishek Bondia, co-founder and principal officer, SecureNow.

Claim settlement without surveyor report

IRDAI issued an exposure draft on October 31 on (Insurance Surveyors and Loss assessors) (Amendment) Regulations. It lets motor insurance companies to settle claims below Rs 75000 without involving a licensed surveyor. Earlier, this limit was at Rs 50,000. “The increase from Rs 50000 to Rs 75000 is in line with inflation. The threshold will ensure that most external damage-related claims will be dealt with. These do not need much of physical inspection. With the use of technology, customers can upload photos and videos and the insurer can quickly settle the claim, saving at least a couple of days,” said Sajja Praveen Chowdary, Head- Motor Insurance, Policybazaar.com.

As insurers and other intermediaries invest more in technology, the pace of settlement of claims will further increase. “This will reduce the time taken to settle the claims. As the customers and insurers increase the use of technology and artificial intelligence in claim settlement, this is a step in the right direction,” said Satapathy.

Cancelling registration certificates

If your vehicle qualifies for a total-loss (the claim amount is at least 75 per cent of your vehicle’s insured value), then you – the policyholder – must ensure that the vehicle’s registration is cancelled, as per a July 2019 IRDAI diktat.

IDRAI observed that, sometimes, when vehicles were sold to scrap, the documents were being fraudulently attached to other vehicles – most probably stolen – along with the scrapped cars’ engine chassis numbers.

A total-loss claim happens when a vehicle catches fire, is stolen or a major accident takes place. In such cases, the vehicle become unfit for use, not available for use or the cost of repairs exceed the threshold mentioned above, and hence it is declared as total loss.

“There was also a possibility that a scrapped vehicle comes back on road. Such a sub-optimal vehicle on the road is a risk. The regulator’s directive of cancelling the registration of the vehicle is aimed at increasing the safety of road users,” says Sanjay Datta, chief underwriting and claims, ICICI Lombard General Insurance Company.

In case a vehicle suffers ‘total loss’, the policyholder (vehicle owner) has to apply for the cancellation of the registration of the said vehicle, by informing the road traffic authorities. Upon cancellation, the policyholder or the vehicle owner should intimate the insurer. Then, the insurer will pay the insured value to the policyholder.

Long-term third-party covers

Until last year, vehicle owners had a choice of either buying a comprehensive motor insurance cover, which came bundled with own-damage (OD) cover (for damage caused to the owner’s car) as well as third-party (TP) insurance covers (damage caused to third party). Or, they could just buy a standalone third-party insurance cover. All such policies were just one-year policies and had to be taken at the time of buying a new car, and had to be renewed every year to ensure that the car at least has a third-party cover.

However, last year, the Supreme Court ruled that at the time of purchase of a new vehicle long-term third-party covers had to be sold. IRDAI directed insurance companies to sell third-party covers for three years (for cars) and five years (for two-wheelers). That led to a situation where a new car buyer looking for comprehensive cover was given a combination of one-year OD and three-year TP covers. . With the OD covers still coming with a one-year term, many new car buyers are left without the own-damage cover after a year, while the TP cover still continued.

However, now you can buy a stand-alone own-damage cover, so long as your  vehicle has a TP cover.

However, here is a catch. It is better to initiate the renewal process at least one month before the OD cover expires. “Even if your OD cover has expired, but the TP cover is still in force, you can still consider buying a standalone OD policy for your car by approaching an insurer. If there is a time-lapse between the day of expiry of your OD cover and the day of initiation of OD re-purchase application, the insurer may conduct vehicle inspection to ascertain if there is a damage to the vehicle as a part of underwriting process,” said P. Ramesh Venugopal, Executive Vice President (Claims) at IFFCO-Tokio General Insurance.

Also, there is no need to approach the same insurance company from which you have the long-term TP cover. “Usually, the dealers package the insurance policy at the time of selling the car. In these cases, the policyholders are pushed to buy insurance policies from the company with which the dealer has a tie-up. Also, certain features and add-ons are packaged in the policy that they might not even need and end up paying a higher premium. It is not necessary

In June 2019, the TP cover premium rates were hiked in line with the loss ratios of insurers. Car owners have to ensure timely renewal of their motor insurance policies. This becomes all the more important as the amended Motor Vehicle Act levies stiff penalties.