New Delhi: As the motor insurance is mandatory, everybody needs to keep an eye on the renewal date every year. At present, if you fail to renew the motor insurance by due date then the policy gets lapsed. Hence, to get the policy renewed by due date holds big importance to everyone in the country. As the due date comes close, the task to get the policy renewed becomes top priority.

To address the issue, the (Insurance Regulatory Development Authority) IRDA and insurance companies are in talks to extend the term for motor insurance to two years. The step is expected to give boost to the insurance companies. The move is expected to benefit both the insurer and insured. It is said that with extension of insurance term, the premium collection will increase for the companies whereas people will have to bear lower cost for the insurance.

Currently, for most of the companies, the motor insurance is not turning out to be a profitable proposition as the claim amount generally exceeds the premium amount. According to the sources, the IRDA is mulling to extend the insurance term to two years for both private and commercial vehicles. If the move is substantiated, IRDA may further increase the term to five years.

The government has also suggested linking the insurance cover to registration and fitness certificate. According to the Finance Ministry, insurance renewals are not done as per the expectation. IRDA Chairman J Harinarayan has confirmed that the talks on extending the term are going on.

According to an official from the Finance Ministry, long term insurance cover is going to boost the insurance sector because the companies have to incur losses in one year’s term of agreement as most of the policy holders fail to renew the insurance by due date. As well, people seldom renew the motor insurance in rural parts of the country. If the insurance is linked to registration certificate then this problem can be aptly handled.    

However, the insurance companies are not showing much interest in increasing the term of motor insurance. On the other hand, insurance companies have been advised to prepare a working group over the issue.


Latest News from Business News Desk