Buying motor insurance in India could become a more straightforward exercise from Dec. 15. The Insurance Regulatory and Development Authority of India (IRDAI) has directed general insurers to reorganise their motor insurance offerings into four distinct layers, replacing the existing approach in which multiple covers are often packaged together.
The move is intended to give vehicle owners a clearer picture of their insurance protection and its cost. Under the proposed arrangement, customers will be able to distinguish mandatory liability insurance from additional covers that they may choose based on their needs. Separate pricing and coverage details for each component are expected to make policy comparisons easier and reduce confusion at the time of purchase.
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The Four-Layer Breakdown
Under the new regulatory guidelines, motor insurance policies for private cars and two-wheelers will be divided into four individual layers:
Third-Party Liability: The mandatory statutory cover protecting against legal liabilities towards third-party injuries, deaths, or property damage.
Legal Liability to Occupants: Optional or extended protection covering passengers travelling in cars or pillion riders on two-wheelers.
Personal Accident Cover: Financial safeguards protecting the vehicle owner or driver against accidental injuries, disability, or fatalities.
Loss or Damage to the Insured Vehicle: The 'own damage' component covering theft, natural calamities, or accidental damage sustained by the insured vehicle.
To ensure that the new system is applied consistently across the insurance industry, the IRDAI has introduced standardised policy language and made a customer option form compulsory. These measures are intended to bring greater uniformity to the way insurers communicate policy terms and offer coverage.
A major requirement is the disclosure of individual premiums. Insurance companies will have to specify the amount charged for each coverage component, allowing customers to see how much they are paying for different forms of protection instead of relying solely on a consolidated premium figure.
IRDAI has stressed that insurers must ensure their policy schedules accurately set out the protection provided under each section, along with the corresponding premium. This requirement will help vehicle owners understand the cost of individual covers and check precisely which benefits are included in their policies.
The proposed changes follow directions issued by the Supreme Court of India in the case of National Insurance Company Ltd. vs SmBt. Thungala Dhana Laxmi & Others. The court had highlighted the importance of making motor insurance policies easier to understand, with particular emphasis on protecting consumers and bringing greater consistency to the handling of insurance claims.
With the new framework scheduled to take effect in December, vehicle owners may want to reassess their existing insurance arrangements. Understanding the different coverage options will help them identify gaps in protection and choose a policy that better suits their vehicle usage and driving needs.
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