IRDAI has issued an “Exposure Draft on Long-Term Motor Products covering both Motor Third Party Insurance and Own Damage Insurance (“Exposure Draft”)” for seeking comments/suggestions of the stakeholders.
Objective –The Authority has proposed to permit all General Insurers to offer long-term Motor products covering both Motor Third Party(MTP) Insurance and Own Damage(OD) Insurance in order to allow the policyholders a wider choice.
Major highlights of the Exposure Draft are as follows:
- The Authority has proposed to permit all General Insurers to offer the following long-term Motor Insurance policies:
- Private cars – 3 year OD + 3 year MTP Liability cover
- Two-Wheelers – 5 year + 5 year MTP Liability cover
- Long-term OD cover in case of renewal of standalone OD policies such that the long-term OD cover is co-terminus with the MTP Liability cover.
- Miscellaneous and special types of vehicles (Class D Vehicles) – 3 year OD + 3 year MTP Liability cover
- Motor add-ons co-terminus with the Motor OD cover in respect of Private Car, Two-wheelers and Class D vehicles
- The insurers shall have a Board approved policy in place which shall contain aspects relating to operational matters, accounting and disclosures in order to address the issue pertaining to cancellation of policy including claw-back of commission.
- Pricing of long-term policies shall be made based on sound actuarial principles.
- The depreciation rate applicable on the Insured Declared Value IDV agreed shall not exceed 10% per annum during the policy period.
- The premium for the entire policy term shall be collected at the time of sale of insurance policy. However, the premium for the year shall only be recognised as income and the remaining amount shall be treated as “Premium Deposit” or “Advance Premium”.
- The long-term policies shall have standard conditions relating to cancellation/refund of premium as below:
- The policy shall have a 30-day free-look period from the date of inception of the policy.
- The Motor OD policy can be cancelled during the tenure of the policy by giving the notice of cancellation by either parties and the refund of premium shall be as under:
I
Future Year Premiums
Full refund
II
For the policy year in which policy is cancelled:
Where no claims are reported during the year
Refund of pro-rata premium pertaining to the year of cancellation
III
For the policy year in which policy is cancelled:
Where claims are reported during the year
No refund of premium
IV
GST and other government taxes
Refund to the extent permissible as per the applicable norms.
- The detailed terms and conditions of the policy shall be specified in the policy contract, the prospectus and on insurer’s website.
- Insurers shall maintain sufficient reserves including following to meet future obligations at all times and these reserves shall form part of the solvency calculations.
- Unearned Premium Reserve (UPR)/
- Premium Deficiency Reserve (PDR) /
- Claims ‘Intimated But Not Reported’ (IBNR) Reserves
- NCB applicable at the end of the policy tenure in case of long-term policies would be same as that would have been earned if such policies were renewed annually
- Insurers shall monitor the transaction-level data pertaining to long-term policies at regular intervals of at least one year.
- Commission to agents and intermediaries and distribution fees to the MISPs shall be paid in the year in which the premium is booked as income by the Insurer
- The products shall be filed under the Use and File procedure as permitted under circular dated October 13, 2022.
- All the other provisions and requirements of Guidelines on “Product Filing procedures for General Insurance Products” shall remain applicable.
Source category: IRDAI
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