IRDAI Guidelines for Car Insurance Premiums

The Insurance Regulatory and Development Authority of India (IRDAI) is the apex authority that regulates the Indian insurance sector. It has set some essential rules that insurance companies and policyholders must follow to ensure fair practices and transparent transactions. They include faster claim settlement, eliminating malpractices, effective grievance redressal, and fraud prevention. This article dives deep into IRDAI car insurance guidelines, helping you make an informed decision when buying a car insurance policy.

Read more

Importance of IRDAI Rules for Car Insurance

Have a look at the following points that highlight the importance of IRDAI regulations for car insurance:

• The IRDAI guidelines establish compulsory insurance coverage like the third-party policy.
• The authority regulates policy terms & conditions to protect individuals.
• IRDAI oversees claim settlement procedures followed by insurers to prevent delays & fraud.
• The regulations set by IRDAI specify insurance premium structures that comply with the Motor Vehicles Act, 1988.

IRDAI Guidelines for Third Party Car Insurance

A third-party car insurance policy is mandatory by motor laws in India. It protects the car owner from liabilities arising out of third-party losses (injury/death) and property damages. Here are IRDAI regulations on third-party liability insurance:

• The insurance company must compensate the third party for any loss of property or life caused due to the insured vehicle.
• In the event of third-party death, the insurer must compute the amount of compensation based on the net worth of the deceased. The MACT (Motor Accidents Claims Tribunal) takes the final decision.
• For third-party property damages, the compensation amount is as per the extent of damage caused by the insured car and is up to Rs. 7.5 Lakhs.
• The insurance company pays for any legal liabilities arising from an accident involving the third party.

IRDAI Guidelines for Comprehensive Car Insurance

Though comprehensive car insurance is not mandatory, it is advised to opt for this plan for exhaustive coverage. It covers both third party liabilities and damages to own vehicle. The following are the IRDAI guidelines for a comprehensive car insurance policy.

• The insurer must provide all coverage offered under a third-party insurance plan.
• The insurance company is liable to pay for damages not only due to accidents but also natural or man-made calamities, fire, theft, etc.
• In case of death or disability of the paid driver of the insured vehicle, the insurer is liable to pay the sum insured as per PA (Personal Accident) policy terms.
• A separate third-party insurance policy is not required if a comprehensive plan is purchased.
• Comprehensive car insurance can be customised by adding add-on covers for an additional premium.

IRDAI's Guidelines to Make Car Insurance Affordable

The following are various ways that IRDAI has implemented to make car insurance more affordable:

• Usage-Based Insurance: PAYD (Pay as You Drive) insurance & PHYD (Pay How You Drive) insurance are usage-based car insurance policies for which policyholders pay their premiums based on the kilometres driven and driving behaviour, respectively. It helps car owners who drive less or more safely save significant costs.
• Extended Personal Accident (PA) Cover: In order to provide additional financial security to car owners in case of accidents, IRDAI has extended the PA cover amount to a minimum of Rs. 15 Lakh.
• Mandatory 3-Year Third-Party Insurance: IRDAI has made third-party insurance more accessible & affordable by making the 3-year third party insurance mandatory. This step helps in having stable premiums and protects you against seasonal hikes, thus being a sensible and cost-effective choice. Apart from this, IRDAI has also increased the maximum coverage for property damages to Rs. 7.5 Lakh.

Car Insurance General Exclusions

Every car insurance policy has some exclusions mentioned in the policy document. These are some of the most common situations for which the insurer doesn't provide a claim. Have a look:

• Damages arising out of mechanical/electrical failure and regular wear & tear
• Any intentional damage to the insured vehicle
• Driving under the influence of alcohol or intoxicating substances
• Any damage if the policy has expired
• Illegal use of the insured vehicle or any criminal act
• Any damage while driving outside the geographic area specified in the policy
• Damage from not abiding by the traffic regulations

Note: Carefully go through your car insurance policy to know what all is not covered.

Customer Turnaround Time for Claims & Grievances

Here is the list of certain timelines defined by IRDAI for fair & timely transactions:

Source: https://irdai.gov.in/documents/37343/369581/Motor+Insurance+Handbook+(English).pdf/44f2a216-f063-9acd-b062-70b6aca97c0f?version=1.0&t=1631528776152

IRDAI Rules for Car Insurance Renewal

IRDAI has defined some guidelines on car insurance renewal. These include:

• The policy must be renewed in time to avail continuous coverage.
• The insurance company will not pay the cost of damages that occurred when the policy was not active.
• NCB (No Claim Bonus) will become zero if policy is not renewed within 90 days after the expiry.
• Standalone Own Damage (SAOD) policies must expire with third-party insurance.

IRDAI Rules for Total Loss of the Insured Vehicle

A car is considered to be a total loss by the insurance company when its repair cost is higher than 75% of its IDV. This is applicable if the damage arises from an accident, natural calamity, or other covered risks. Here are IRDAI guidelines for the same:

• For Total Loss (TL)/ Constructive Total Loss (CTL) of the Insured Vehicle- IDV (including accessories as specified in the schedule) minus the value of the wreck
• For partial losses (other than TL/CTL)- Actual & reasonable costs of Vehicle Repair/ Damaged Part Replacement (subject to depreciation as mentioned in the policy terms)
• Insurers must ensure continuity of the third-party policy if the wreck is retained by the policyholder.

Vehicle Depreciation & IDV Rules by IRDAI

Depreciation is the reduction in the market value of a car. It increases with the time & vehicle age and is an important element to calculate the claim amount. On the other hand, IDV is the approximate current market value of the car. Vehicle owners can easily calculate their car's IDV by using an IDV calculator available online. Below is the table showcasing the vehicle depreciation rates as per IRDAI.

Note: The IDV of vehicles older than 5 years and of discontinued models is to be determined on the basis of a mutual understanding between the insurer and the car owner.

Recent Updates in IRDAI Guidelines on Car Insurance

To ensure better protection for policyholders and streamlined processes for insurance companies, the IRDAI regularly updates their car insurance guidelines. Here are some recent changes:

• Third-party insurance remains mandatory for all vehicles
• Car owners can buy an annual SAOD (Standalone Own Damage) policy along with a 3-year third-party plan.
• NCB has a standard grid and is the same for all insurers.
• In case of total loss or theft, policyholders need to send their vehicle's RC to the insurer, which will stand cancelled.
• Compulsory deductibles are now Standard Deductibles, which are fixed at Rs. 1000 for cars up to 1500cc and Rs. 2000 for cars above 1500cc engine capacity.
• IRDAI recommends an insurance cover of Rs. 25,000 for all passengers travelling in the insured vehicle.

In a Nutshell

Vehicle ownership is a great privilege but comes with some responsibilities. As a car owner, you must know and follow these car insurance guidelines set by IRDAI to ensure compliance with laws and continuous protection for you and your car. With these car insurance rules, you can benefit from better claim processing, clear total loss rules, and flexible car insurance renewal options.