As per the Motor Insurance Act, only the third-party motor insurance cover is mandatory in India. However, neither the policyholder nor the policyholder’s car gets protected under this cover.
According to the data available from the General Insurance Council, there has been a decline of 2.3 per cent in the Own Damage (OD) premium collection of insurers — from Rs 10,724 crore in August 2018 to Rs 10,480 crore in August 2019. With the ongoing slowdown in the economy and a decline in OD covers for motor vehicles, the automobile industry is facing a tough time.
The data also showed that for the month of August 2019, the overall motor premium collection (TP and OD) rose by 5.9 per cent to Rs 26,406 crore. Its main contribution was due to the 12.9 per cent increase in Third Party (TP) insurance cover. TP insurance cover and the enactment of the new Motor Vehicles Act was made mandatory by the Supreme Court. Own Damage cover, as the name suggests, provides cover for loss or damage to the insured vehicle due to accident, fire or theft.
Experts suggest the downfall in the OD covers can be because of the downturn in the Indian automobile sector with the major carmakers reporting negative sales numbers in August 2019. This reduces the fresh policies sold by insurers. The launch of the 3-year policy also adds to that.
Naval Goel, CEO, and Founder of PolicyX.com says, “IRDA directed companies last year to provide 3-year policies due to which policies which were bought for the first time in 2018 will now get renewed only in 2021. Therefore, there is an impact on renewal premium.”
Additionally, the recent changes in the penalty for not having adequate documents while driving are also one of the reasons behind the increase in TP covers as it is mandatory to drive legally on the roads of India.
As per the Motor Insurance Act, only the third-party motor insurance cover is mandatory in India. Hence, most people opt for the TP cover. Even though TP provides cover for any damage done to the third party vehicle, it doesn’t provide coverage for any damage done to the policyholder’s vehicle. Neither the policyholder nor the policyholder’s car gets protected under this cover.
A comprehensive motor insurance plan, however, provides cover towards loss or damage of the insured vehicle, in addition to the third-party cover. Policyholders do not need to buy a third-party insurance cover separately, with comprehensive cover as it covers damages caused to the policyholder’s own car during an accident, along with the third party damage.
Sajja Praveen Chowdary, Head-Motor Insurance, Policybazaar.com, says, “The benefit of buying the comprehensive cover is that it offers protection against all damages caused to the car and self in the event of an accident. In addition to accidental damages, comprehensive car insurance protects your car against any theft, accidental fire, and any other damage caused to the car.”
This cover also provides cover for lawsuits, legal fees brought against the policyholder in case of an accident. Goel adds, “Third-party offers coverage to damage to others as the result of an accident that was deemed your fault. Comprehensive cover is an all-round cover that takes care of your third-party liabilities, but also covers you and your car.”