The Insurance Regulatory and Development Authority of India has decided to withdraw long term packages offering third party insurance for 3 years and 5 years for four-wheelers and two-wheelers respectively, with effect from August 1, 2020.
The long term packages were introduced following a Supreme Court direction in 2018 that all general insurers should offer 3-year third party policies for new four-wheelers and 5-year third party policies for two-wheelers with effect from September 1, 2018.
On a review, the IRDAI said that it has noticed some concerns with long term policies such as :
Based on these factors, the IRDAI has decided to withdraw long term policies with effect from August 1 2020. However, it has clarified that except for this withdrawal, all other extant provisions will continue mutatis mutandis.
No Claim Bonus in respect of policies already issued will accrue only when the policy term has been completed.
The direction for providing 3 years or 5 years long term policies was issued by a bench comprising Justices Madan B Lokur and Deepak Gupta on July 24, 2018 in the case S Rajaseekaran v Union of India, with the aim of extending the coverage for vehicles.
The direction was issued on the basis of decisions taken by the Supreme Court Committee on Road Safety, headed by former SC judge Justice K. S Radhakrishnan. The bench noted that in a meeting held by Committee on 26th March, 2018, it was recorded that there are about 18 crore vehicles plying on the road and only about 6 crore vehicles have the mandatory third party cover, which meant that 66% of the vehicles were plying without third party insurance.
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