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The Insurance Regulatory and Development Authority of India (IRDAI) recently withdrew its long-term insurance package plans in the country and this will result in new two and four-wheelers becoming more affordable starting 1 August this year.
According to carandbike, the rule that mandated long term insurance for between three and five years for motor vehicles has been gotten rid of, and the new mandate states that a one-year's own damage insurance cover is necessary when buying a new vehicle.
Going forward, owners of new vehicles will have to purchase a fully comprehensive insurance policies for their vehicles for a period of one year. Third-party insurance will continue to be mandatory for three years and five years for four-wheelers and two-wheelers, respectively.
Mr Nikunj Sanghi, the Managing Director at JS FourWheel Motors, and Chairman of the Automotive Skills Development Council, said, "It is a positive impact in the sense that anything that makes an impact on the buying decision, specifically in the present environment, it will be looked at as positive."
"It was more of a pain in terms of how it needs to be followed, how will the renewal be done. Once the first year of comprehensive cover is over and you want to change the insurance company, you already have a five-year lock-in with some other insurance company. So how do you port to another insurance company? So those were bigger challenges on how it would pan out," he added.
The IRDAI had announced a decision to dissolve long-term motor vehicle insurance plans during June this year after it discovered issues with performance of the insurance policies.
The mandate stated the buyers had to purchase a combination of fully comprehensive and third-party insurance for a term of three years and five years for four and two-wheelers respectively.
The result was an increase in the on-road prices of vehicles, and a low buying sentiment from the masses thanks to the increased costs.
With the withdrawal of the old mandate, on-road prices of vehicles are expected to witness a minor reduction. It may be noted that customers who chose a combination of comprehensive and third-party insurance previously will see no changes to prices of a new vehicle.
The industry has welcomed the announcement of withdrawal of long-term insurance policies for vehicles as it has come at a time when the industry needs to register sales numbers.
Thoughts About The IRDAI Withdrawing Long-Term Insurance Policies
This move will help boost sales by a small margin but it might be just what the industry needs to bounce back. A mix of new vehicles being launched, the need & want for personal mobility, the upcoming festive season, and the withdrawal of long-term insurance policies will definitely help the industry recover over the course of the next few months.