Long-term policy buyers: Time to check what you are getting on renewal

We are seeing tectonic plates shifting in the Motor portfolio of GI (General Insurance) industry. Come 1^st Sept,2019 there will be several lacs of policies up for renewal. And the renewal plans will be dependent on what was purchased last year. So, quick flash back to, 1^st Sept 2018, owing to the order of the Apex court, IRDA gave directive to Insurance companies to issue long term policies with the below options available for the customer.

Product	Own damage (policy period in years)	Third party liability (policy period in years)
Four-wheeler	1	3
Four-wheeler	3	3
Two-wheeler	1	5
Two-wheeler	5	5

What was the reason for this directive? This was in the backdrop of the fact that a number of private vehicles (read two wheelers & four wheelers) were not having the mandatory TP (Third Party) Insurance. As per industry estimates, 60% of vehicles are being driven without any insurance with majority of them being Two Wheelers. What is the current implication? On Indian roads, Two-wheelers constitute approximately 76% of the total vehicular traffic and account for 34% of Accidental Deaths. Given that, the long-term mandate was mainly on TP Insurance, it means from 1st Sept 2019 onwards, a lot of vehicles won’t be having any OD (Own Damage) cover. Disadvantage to the ignorant An OD cover safeguards the owner against natural calamities (Flood, Earthquake, Lightning), Fire, Theft, Terrorism and the omnipresent road accidents. While a knowledgeable customer would be going in for a renewal of their standalone OD (Own Damage) cover, the ignorant, who may be happy till last year under the assumption that they are adequately covered at lower price for next 5 years, may find themselves at the losing end in case of any casualty in next 2 or 4 years. Of course, their TP cover will protect them against any liabilities to a third party, but their own damages will not be covered. Advantage to the long-term OD buyers The ones who bought 3+3 or 5+5 product, even though they would have doled out a higher premium at the time of vehicle purchase for covering their Car or Motorbike,will continue to enjoy the benefits of both OD and TP parts of their policy, along with the mental peace of not having to renew the policy. Unfortunately, the awareness level is still very low when it comes to understanding insurance and intermediaries too fail to make people understand the nitty grities of insurance. This lack of awareness is evident in the fact that even today the penetration of general insurance remains less than a percent in India. Lastly, here are some factors to be cautious of while buying an insurance policy: 1) Mis-selling: Most of the Two-wheeler policies sold through dealers last year were mostly 1+5, where the sales person might not have explained the customer about the differences between 1+5 and 5+5. Same might have happened in case you bought a Motor Car policy. Therefore, if you have not been explained this difference well, pls contact your dealer, agent or broker and get clarification. And if you agree that there is benefit in having an OD cover, please get the OD cover immediately to protect your vehicle against own damage risks in future. 2) Lack of interest and information:In the excitement of buying your new vehicle, you may have not looked at the type of cover you are being sold i.e. whether the vehicle was covered last year for OD (Own Damage Section) for a long term or just 1 year. Again, please check your policy documents or talk to your dealer, and get your policy corrected. 3) Type of Cover: Both, two-wheelers and four-wheelers have several addons like Zero depreciation, Engine protection etc. You can continue with such coverages as in last year’s policy, only if your OD part is also getting renewed. 4) Term of Policy: When you finally go for renewal, after finding out that your last year’s policy was having just 1-year OD cover make sure that your OD cover has the same time period as your TP cover. If there is gap for say 2-3 months,we suggestto takethe policy on pro rata basis to save the additional cost. Authored By: Prawin Chandra Mishra Vice President Strategic Partnership Godigit General Insurance