Six ways your motor insurance policy is set to change. Here's how it could affect you
The Insurance Regulatory and Development Authority of India has released draft rules to revisit the current own damage product structure of motor insurance policies. Here are six key changes that you need to be aware of.
Several recommendations of the working group, comprising industry executives, to reexamine the product have been accepted. Here are six key changes you need to be aware of:
- Customisable premiums
“Pay as you drive and pay how you drive covers could be offered based on data gathered. Insurers can consider developing products that factor in kilometres and driving behaviour,” says Adarsh Agarwal, Appointed Actuary, Digit General Insurance Ltd. This could mean those exhibiting good driving behaviour— as captured by telematics devices or mobile apps —will be rewarded by way of lower premiums. Conversely, rash drivers will have to shell out more.
- Friendly depreciation rules
New sum insured computation
The Irdai has outlined new sum insured/insured declared value (IDV) calculation rules for private cars and two-wheelers.
In case of older private cars, the sum insured will now represent the manufacturer’s current listed price, minus adjusted age-wise depreciation under one of the options suggested by the working group. Under another option, for new cars, for the initial three years, the sum insured will cover current day on-road price of the vehicle including invoice value. It will also have to factor in road tax and registration charges as well as value of accessories. You need not buy the return to invoice add-on, it will be built into the base policy.
“At present, if you were to buy a car for Rs 10 lakh, and have paid an additional Rs 1.5 lakh towards road taxes and registration, your IDV will be limited to Rs 10 lakh. Under the proposed regime, the sum insured will be Rs 11.5 lakh in the first three years,” says Chowdary. After three years, the sum insured will take into account the new depreciation table. The depreciation will range from 40% after the third year to to 60% up to the seventh year. Beyond the seventh year, the sum insured shall be arrived at a mutually agreed value between the insured and the insurer.
Calculation of depreciation on parts to be standardised
|Age of the Vehcile||Depreciation on all parts (including Glass) (%)|
|Up to one year||10|
|Over 7 yrs||65|
Calculate the sum insured for your car
Source: Policybazaar.com. Note: Total invoice value assumed to be Rs 11.5 lakh (ex-showroom price Rs 10 lakh, registration charges and taxes Rs 1.5 lakh); sixth renewal onwards, the IDV/SI will depend on insurer. *Current = Depreciation on ex-showroom price. **Option-A (proposed) = Depreciation on ex-showroom price. #Option B (proposed) = Depreciation on total invoice value
- Better flood damage cover
- No claim bonus slabs
- Standardised deductibles
- Rules for total loss