The regulator will require insurers to show premiums and protections separately, giving car and two-wheeler owners clearer choices while keeping third-party liability compulsory.
India’s insurance regulator has ordered a major redesign of motor cover for private cars and two-wheelers, requiring policies sold from 15 December to be split into four clear layers so customers can choose protections separately. The move by the Insurance Regulatory and Development Authority of India is intended to make pricing and cover terms more transparent, while still keeping third-party liability insurance compulsory.
According to the circular reported by the Economic Times BFSI, the new structure will comprise mandatory third-party liability, optional legal liability for occupants and pillion riders, personal accident cover, and optional own-damage protection. Insurers will also have to issue a standard customer option form and a Customer Information Sheet at the point of sale, with premiums shown separately for each cover. The change applies to general insurers, apart from standalone health insurers and specialised insurers.
The regulator said existing policyholders who already have third-party cover will be able to add occupant liability protection by paying an extra premium, without having to cancel or replace their current policy. The optional occupant cover will include pillion riders and employees of the insured, but not the owner-insured or immediate family members such as parents, spouses and children. Coverage for occupants will also be limited to the vehicle’s registered seating capacity.
Personal accident insurance for the owner-insured will remain mandatory, while cover for other occupants, pillion riders and drivers other than the owner will be optional. The changes follow directions from India’s Supreme Court in National Insurance Co v Thungala Dhana Laxmi, a case in which the court pushed for a clearer four-part motor insurance framework and standardised disclosure documents to help vehicle owners understand what they are buying. Legal summaries of the judgment say the court also wanted insurers to use uniform policy wording and clearer consumer information, reflecting concerns that many buyers do not fully understand the gap between compulsory insurance and the protection they actually receive.
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