IRDAI Sets Out New Motor Insurance Rules

In a recent development, IRDAI (Insurance Regulatory and Development Authority of India) made it mandatory for all general insurance companies in India to issue five-year third-party two-wheeler insurance for new bikes and three-year third-party insurance for new cars.

Online sources reveal that IRDAI issued the decision following a Supreme Court order. According to the Indian Motor Vehicles Act, third-party car and two-wheeler insurance is compulsory for all vehicles on Indian roads.

Overview of New Motor Insurance Regulations

Effective from 1 September 2018, general insurers will only offer 3-year third-party insurance covers for new cars and 5-year third-party insurance policies for new motorcycles. At present, there are two types of motor insurance options available for car and two wheeler owners. These options are stand-alone, third-policy insurance policy for two-wheelers and cars and comprehensive, first-party car and two-wheeler insurance policies.

In accordance with the orders by honourable Supreme Court of India, IRDAI directed general insurance companies to provide new car and two-wheeler owners with the options of long-term package cover with both third party insurance and own damage insurance for 3 years or 5 years, or a comprehensive cover with a 3 or 5 year term for the third-party insurance cover and a one-year cover for the own damage.

The new motor insurance regulations mean neither insurers nor policyholders can cancel third-party cover during the term. However, in the event of double insurance or in the event of the vehicle not being used or if the vehicle is sold or transferred, the third-party insurance can be cancelled during the term of the plan. In addition, no-claim bonus will now be applicable on the own damage component after the completion of the policy term.

Impact of the New Motor Insurance Regulations

Sources further reveal that purchasing new cars or two-wheelers will become more expensive in the light of the mandatory, long-term third party motor insurance policy. For cars with engine capacity less than 1,000 cc, car owners will need to pay Rs 5,286 for 3-year third-party insurance. Similarly, for cars with engine capacity between 1,000cc and 1,500cc, 3-year third-party insurance will cost around Rs 9,534 and for cars with engine capacity more than 1500CC, the cost of 3-year third-party motor insurance will be Rs. 24,305.

For bikes with engine capacity below 75 cc, the 5 year-third party two-wheeler insurance will cost Rs. 1,045. For bikes with engine capacity between 75Cc and 150 cc, the cost of 5-year third-party insurance cover will be Rs. 3,285 and for bikes with engine capacity between 150Cc and 350CC, the cost of 5 year third-party cover will be Rs. 5,453. Those who own super bike with engine capacity more than 350CC will need to shed Rs. 13,034 for 5-year third-party insurance cover.

Final Thoughts

Currently, more than 60% of two-wheelers and between 35 to 40% cars are driven on Indian roads with no insurance cover. Quite naturally, both insurers and the government have welcomed the new regulation. Now that the new motor insurance regulations have come into force, it will be interesting to see if it will affect the sales of new cars and two-wheelers in coming months.

motor insurance changes.

Shruti Gupta is a writer and digital marketing consultant at She has a passion for technology, startups and other business topics. She lives and breathes digital marketing, and has contributed to a number of famous websites. Her aim is to spread her thought-provoking ideas to all generations.