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From 1st September, IRDAI allows insurers to make ‘standalone own damage’ motor policy available to their customers

IRDAI allows insurers to issue ‘standalone own damage’ motor policy to customers.This regulation will be effective from 1st September 2019. With this regulation in effect, policyholders can now buy OD policy and TP policy from different insurers.
standalone own damage policy for vehicle from 1st September

As per the Supreme Court order, the Insurance Regulatory and Development Authority of India (IRDAI) were directed to implement the bundling of cover for the Own Damage portion as an immediate necessity from 1st September 2018.

This bundled cover had both essential components, i.e. Own Damage (OD) premium and Third Party (TP) premium. Under bundled cover, a one-year Own Damage component was bundled with a three year and five-year third party liability cover for a private car and two-wheeler respectively.

Before this regulation, the only option was to renew the OD component from the insurer from whom the TP policy is bought. However, with this regulation, renewal of OD policy independently from a different insurer is now possible.

From when is the new standalone Own Damage regulation effective?

The new regulation is effective from 1st September 2019. From or after 1st September 2019, the owners of both new as well old vehicles can buy Own Damage and Third Party policies separately since there would be no compulsion of issuance of bundled policies thereafter.

Also, as per the new regulations, the policyholder of the insured vehicle would be able to renew the Own Damage component of the bundled cover which is falling due on or after 1st September 2019.

The insurance company providing the Own Damage cover should ensure that the policyholder possesses a Third Party cover already or must buy simultaneously.

Furthermore, the Own Damage policy document should have the insurer’s name, policy number and start & end date of the third party policy mentioned on it.

Also, it should be already clearly mentioned in the standalone OD policy that the coverage is only for Own Damage and no for other liabilities related to the vehicle.

What are Own Damage (OD) and Third-party (TP) cover?

OD helps to cover the loss or damage caused (including theft) to the insured vehicle which is insured whereas TP helps to cover the injury or damage caused by the insured vehicle to another person or third-party property.

Note: As per the Motor Vehicles Act, 1988, the third-party liability cover is mandatory in India.

What is the impact of allowing the issuance of standalone OD policy regulation?

By making the changes in the earlier orders, the IRDAI has asked the general insurance companies to make their customers available with the standalone annual Own Damage (OD) covers for both cars and two-wheelers. Moreover, this new regulation would be applicable not only for new vehicles but also for old vehicles.

It is also a good incentive for all the policy seekers or policyholders who were looking for standalone options after the bundled policy regulation effectiveness. As after 1st September, the policyholders are not bounded to the same insurer to renew the OD cover in the following year, even those who had bought a bundled policy from a different insurer. Policyholders can renew OD policy as a standalone plan from another insurer despite having TP from another insurer.

And for insurance companies, this regulation offers clarity for providing OD covers to their customers.

Do the policyholder of the insured vehicle needs to continue with the same insurer for both OD and TP?

The insured need not stick to the same insurer for both OD and TP policy. Rather than continuing with the one you had for the third party, you have a choice to renew the Own Damage part from another insurer as well.

What would be the cost of the standalone Own Damage policy?

The best part is that the pricing of this new standalone Own Damage would not differ; instead, it would be the same as that of the OD component of the package policy.

The bottom line is, the vehicle owner now has the option to buy the Own Damage policy component individually from a different insurer than the insurer from whom the TP or bundled policy is bought.

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