IRDA Guidelines for Motor Insurance

Insurance Regulatory and Development Authority (IRDAI) is the supreme body in the insurance industry that defines a set of specific rules. IRDAI sets the guidelines for different insurance products, such as personal, life insurance, motor insurance, group, commercial, etc. The rules set by IRDAI must be followed by the policyholders and the insurance companies that ensures faster processing of settlement of genuine claims, grievance redressal, elimination of malpractices, and prevention of car insurance fraud. 

What does Motor Insurance Offer? 

A Motor Insurance policy offers comprehensive coverage to the policyholder against the following - 

1. Damages to the insured vehicle, 
2. Compensation for Third Party Liability against the vehicle owner inclusive of Third Party Property Damage 

Types of Motor Insurance Policies in India: 

Insurance companies across the country offer two types of motor insurance covers for vehicle owners - 

a) Liability Only Policy - Third Party liability insurance is mandatory for all registered vehicles in India. 

If a customer chooses a Liability Only Policy, then vehicle damages will not be covered by the insurer. 

b) A Comprehensive Package Policy - Protection against damages to the vehicle plus the Liability Only Policy. 

A Package Policy would offer a car owner wider coverage for their insured vehicles. 

The following is the list of liabilities covered under extensive coverage of Comprehensive Cover Insurance policies: 

c) Add-ons with Comprehensive Motor Insurance Policy 

The following are the add-ons available with comprehensive motor insurance policy: 

1. Engine Protection Cover: This add-on cover provides financial assistance to the insured against all the expenses in case of any damage caused to the engine of the vehicle, such as electrical or mechanical breakdown, oil spill, water ingression, and complete replacement of car engine parts. 
2. Zero Depreciation: This add-on cover helps in processing the claim settlement amount or reimburse your bill payments for all vehicle segments. This coverage allows the policyholder to receive the entire claim amount without any deduction due to the depreciation factor. This add-on cover is ideal for vehicles under five years of age. 
3. Return to Invoice Cover: After the end of the first policy year, the policyholder can avail themselves of return to invoice cover. This add-on cover provides the full balance without considering the declining balance percentage in case there is complete damage of the car in an accident. 
4. Tyre Protect Cover: Adding this add-on cover with the insurance policy will provide financial assistance for expenses related to any damage to the tyres, such as cuts on a tyre caused by an accident, in-tyre bulges, punctures or bursting of tyres, etc. 
5. Roadside Assistance: This add-on cover provides financial assistance and helps during times of emergency while you are driving whether on city roads or in remote areas. The policyholder availing this add-on cover needs to contact the insurer. Garage service will be provided by the insurer through network garages if the engine fails. 
6. Consumable Cover: This add-on cover supports the policyholder financially for the expesnes related to the consumable elements that are not covered under the standard policy, such as bearings, fuel filter, engine oil, grease, air conditioner gas, lubricants clip, nut and bolt, screw, oil filter, brake oil, washers, etc. 

What are the IRDA Guidelines for Comprehensive Car Insurance Cover?  

The following is the list of IRDAI guidelines for comprehensive car insurance cover: 

1. As per the IRDAI guidelines, comprehensive insurance cover is not mandatory like third-party insurance 
2. Comprehensive insurance plan is recommended as the third-party insurance plan does not provide coverage for damage caused the policyholder’s vehicle 
3. All-round protection for the owner-driver is ensured by comprehensive insurance plan through three parts, such as third-party cover, own-damage cover and personal accident cover 
4. Separate third-party insurance cover need not required when comprehensive plans are purchased 
5. This insurance plan covers damage caused to the vehicles due to natural calamities and man-made perils like vandalism, theft, riots, etc. 
6. Comprehensive plans can also be customised by adding add-ons by paying additional premium amount 

What are the IRDA Guidelines for Third-party Car Insurance Cover?  

A Third-party Liability Car Insurance Policy is legally mandatory in India, covering car owners from third-party losses. Key rules related to this type of car insurance include:  

1. When it comes to car insurance policies, the minimum required insurance coverage is provided through third-party insurance 
2. This is also known as liability-only cover that supports financially to the policyholder in case legal liabilities if bodily injuries happen to a third person due to accident 
3. The amount of compensation to be paid for injuries to a person is determined by the Motor Accidents Claims Tribunal 
4. The claim amount is capped for property damage is Rs.7.50 lakh 
5. As per the Motor Vehicles Act, this is the minimum insurance mandatory for insurance cover available for third-party loss 

What are the IRDAI Rules for General Exclusions? 

The following are the IRDAI rules for general exclusions: 

1. Criminal activity or illegal racing 
2. Damage caused to the vehicle because of not following the traffic rules 
3. Damage from driving under the influence of an intoxicating substance 
4. Damage to the car while driving outside the geographic area 

1. Damage caused to the vehicle when the policy was not active 
2. Any electrical or mechanical failure is not covered 
3. Intentional damage 
4. Regular wear and tear 

What are the Amended Rules of IRDAI? 

The following are the amended rules of IRDAI: 

1. Long-term car insurance plans must be purchased mandatorily for a minimum policy period of three years 
2. Premium amount can be lowered by purchasing only third-party long-term policy 
3. Own-damage cover can be purchased along with third-party insurance policy on an annual basis and here are few details regarding this: 

1. A standard grid for NCB is easily understandable and now it is the same for all insurance companies 
2. In case of total loss or theft claims, Registration Certificate (RC) will stand cancelled, and the policyholder need to send the RC to the insurance companies 
3. Compulsory deductibles and Standard deductibles are now the same 
4. For cars with 1500cc or less and cars with 1500cc or more engine displacement capacity, the standard deductible are fixed at Rs.1000 and Rs.2000, respectively 
5. Insurance cover of Rs. 25,000 is mandatory for all passengers travelling in the insured vehicle as per recommendation of IRDAI 

What are the IRDAI Rules for Car Insurance Renewal?  

The following are the IRDAI rules for car insurance renewal: 

1. To avail continuous coverage, the policy must be renewed on time 
2. The cost of damage will not be paid by the insurance company, in case the vehicle is damaged during the period when the policy was not in force 
3. Any applicable No Claim Bonus will drop to zero if the renewal of car is not done within 90 days of the expiry date 

What are the IRDAI Rules for Total Loss?  

The following is the list of IRDAI rules for total loss: 

1. When the repair cost is very high, the car is considered to be a total loss 
2. The Insured Declared Value (IDV) of a car is directly related to total loss calculation 
3. As per IRDAI, the insurer will declare total loss if IDV exceed 75% 

What are the IRDA Rules for Depreciation?  

Depreciation denotes the reduction in the monetary value of a car, which grows over time and with the age of the vehicle. It plays a crucial role in determining the claim amount. While depreciation reflects the decline in the car's value, the Insured Declared Value (IDV) represents the approximate market value of the vehicle. The IRDAI depreciation table outlines the rates associated with this depreciation.  

Sum Insured for a Motor Insurance Policy 

The sum insured is determined for Own Damage coverage as given below - 

The insurance company will determine the sum insured according to the current value of the vehicle as per the manufacturer and the depreciation value depending on the age of the vehicle. Here, the sum insured is the value for which the vehicle has been insured and is known as the Insured Declared Value (IDV). 

The sum insured is determined for Third Party coverage 

For third party coverage the sum insured is determined as per the Motor Vehicles Act, 1988 and also includes a mandatory personal accident cover for the car owner. The motor insurance policy can also be taken with inclusions like workmen’s compensation for the driver, personal accident coverage for co-passengers, etc. 

Customer Turnaround Times as Approved by the IRDA: 

Determination of Premium for a Motor Insurance Policy: 

There are multiple factors that affect a motor insurance policy premium in India. Different insurers charge different premiums for Own Damage cover. Customers must compare and choose a policy with an affordable premium. The premium will be higher if the customer opts for lower deductibles. Some of the common aspects considered to determine the premium amount for a customer is as follows - Vehicle class, Registration details along with the Engine number, chassis number, seating capacity, cubic capacity, fitness certificate, tax payment details, owner/driver details like gender, age, license validity, qualifications, insurance history, etc. The premium is calculated as per the prevailing rates in the city where the vehicle has been registered. 

1. Premium for Own Damage coverage is decided by the insurance company after approvals from the Insurance Regulatory and Development Authority. Here, the premium will vary based on the following factors - Vehicle Age, Discounts offered by the insurer, loading, past claims, IDV, etc. 

1. Premium for Third Party coverage is determined by the Insurance Regulatory and Development Authority. If there is any insurance breaks, then an inspection has to be conducted and additional charges have to be borne by the policyholder. 

1. If existing motor insurance policyholders add CNG or LPG kits in their vehicles, then the (Road Transport Authority (RTA) office has to be informed to make changes in the registration certificate. The insurer also has to be intimated to include the extra premium that has to be paid for the CNG/LPG kit. 

1. In order to lower their motor insurance premiums, customers can opt for No-Claim Bonus benefits and also get extra discounts for Own Damage and Third Party policies. 

Own Damage Premium Discounts can be obtained if

1. Customers are members of the Automobile Association of India, 
2. They own Vintage Cars as certified by the Vintage and Classic Car Club of India 
3. They install anti-theft devices in their vehicles as approved by ARAI - Automobile Research Association of India and the Automobile Association of India. 
4. Special concessions for modified vehicles for handicapped, blind and mentally challenged individuals. 
5. They choose additional voluntary deductibles or excesses. 

For the Liability Only Section, insurers will give discounts on the reduction of Third Party Property Damage from Rs. 7.5 lakhs to Rs. 6,000. 

No-Claim Bonus (NCB) in Motor Insurance:

The following are the details regarding No-Claim Bonus (NCB) in Motor insurance: 

1. When no claims made throughout the entire policy year, then NCB can be enjoyed 
2. if there are consecutive claim-free years, then as per the norms the NCB varies from 20% for Own Damage premiums and increases to a maximum of up to 50% 
3. No-claim benefit is lost for the succeeding policy year if the policyholder makes a claim 
4. NCB benefit cannot be transferred to the new owner when the vehicle is sold as it is offered to the insured individual and not to the vehicle 
5. Customers can transfer their No-claim benefits from one insurer to another during renewals by producing adequate proof showing the entitlement of NCB. 

Motor Insurance Policy Tenure in India 

Any Motor insurance policy is generally valid for one year after which it has to be renewed by the due date. Grace periods are not offered on premium payments. If the policy is not renewed on time, then the insurer might conduct an inspection before renewing the policy. Additionally, if renewals are not done for more than 90 days for a comprehensive motor insurance policy, the customer might lose the No-Claim Bonus benefit from the insurer. 

Deductibles in Motor Insurance 

The following is the list of deductibles in motor insurance: 

1. The amount paid over and above the claim amount is deductible 
2. There are two types of deductibles, such as Voluntary and Compulsory Deductibles or Excesses 
3. Depending on the type of vehicle insured, compulsory excesses are different varying from Rs.50 for two-wheelers and Rs.500 for commercial vehicles and private cars 
4. Depending on the vehicle age or if there are more claims being done, additional excesses will also be levied by some of the insurers 

Documents Required to Be Kept in Insured Vehicles 

The following are the documents required to be kept in insured vehicles: 

1. Certificate of Insurance 

1. Pollution under Control Certificate 

1. Driving License - photocopy 

1. Registration Certificate - photocopy 

Documents to Be Submitted While Making Motor Insurance Claims 

The following are the documents required to be submitted while making motor insurance claims: 

1. Filled-in Claim Form 

1. RC book of the vehicle 

1. Estimate of Loss - Original 

1. Repair Invoice - Original 

1. Payment Receipt 

For cashless settlements - Repair Invoice and FIR (if required) 

For theft claims - Non-traceable certificate/ Keys of the stolen vehicle 

GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017