By Elton Gomes
From September, buyers of new cars and two-wheelers will have to compulsorily purchase insurance cover for at least three and five years, respectively, as per a new order by the Insurance Regulatory and Development Authority of India (IRDA).
The initial insurance cover for a new car exceeding 1500 cc will be at least Rs 24,305, which will see an increase from a base of Rs 7,890. For 350 cc bikes, buyers will have to shell out Rs 13,024 against Rs 2,323 currently. It should be noted that insurance premiums vary as per models.
On July 20, the Supreme Court ordered that third-party insurance cover for new cars should be for a period of three years, and five years for two-wheelers. However, from September 1, the order would apply to all vehicles sold.
The SC order makes it mandatory for all general insurance companies to issue a three-year third party insurance cover for new cars and five-year third party (TP) insurance cover for new two-wheelers. The insurance cover will have to be offered as a separate product or as part of a comprehensive insurance product.
It has to be noted that although an insurance cover is mandatory for all vehicles, owners in some instances fail to follow up and renew the cover as the vehicle starts getting older. With the new third party insurance in place, owners won’t have to worry about renewing insurance every year.
How will bike manufacturers be affected?
Although the new insurance policy might have reduced owners’ headaches, bike manufacturers might not be very keen on it. Budget bikes, or those powered by a 100 cc engine, are likely to be affected given their high level of price sensitivity. The segment could see an increase of 356% in premium costs – from the current Rs 720 to Rs 3,285. Market experts claim that this hike will not include GST, which means that prices could further increase by nearly Rs 600 on 100 cc, Rs 982 on 150-350 cc, and Rs 2,346 on bikes above 350 cc.
India’s largest two-wheeler manufacturer, Hero MotoCorp is likely to be affected as budget bikes constitute 90% of its sales. “The new IRDA regulations raising the minimum insurance on two-wheelers to five years w.e.f. September 1 will translate into an increase in the on-road price of motorcycles and scooters. This is likely to have an impact on the retail sales of two-wheelers in the short term,” a Hero MotoCorp spokesperson told MoneyControl.
Bajaj announces free insurance offer
IRDA has sent out notices to companies regarding its third-party insurance cover policy, which is why some manufacturers like Bajaj are offering benefits for buying a bike before August 31. The company said that it is offering a one-year free insurance on select models.
As per an official statement from Bajaj, customers will avail a one-year free insurance if they buy a Platina, Discover, Pulsar 150, Pulsar NS 160, or V range of motorcycles.
Cars will not be majorly impacted
Even though bike manufacturers might be hit due to new insurance rule, cars manufacturers are not expecting a huge impact. The minimum increase on 1,000 cc cars is Rs 5,286, while the maximum increase on cars above 1,500 cc will be Rs 24,305.
A Mumbai-based car dealer told MoneyControl, “Since we are nearing the festive season, consumers have already decided on what to buy. A net increase of Rs 6,600 on a Rs 6 lakh car won’t influence the buying decision much. We do not expect any impact on demand”.
Elton Gomes is a staff writer at Qrius
Stay updated with all the insights.
Navigate news, 1 email day.
Subscribe to Qrius