Key Updates in IRDAI Car Insurance Rules

What is IRDAI, and Why Are Its Guidelines Important?

The apex authority governing the Indian insurance sector is the Insurance Regulatory and Development Authority of India (IRDAI). It guarantees uniform policies, fair pricing, and consumer protection. The IRDAI's regulations for Car Insurance are essential since they:

• Specify mandatory coverages, such as third-party insurance.

• Regulate the terms and conditions of policies to safeguard customers.

• Keep an eye on claim settlement procedures to prevent delays and fraud.

• Establish premium structures that adhere to the 1988 Motor Vehicles Act.
   

Insurers must make sure that plans continue to be equitable, accessible, and transparent for all car owners by adhering to IRDAI requirements for Car Insurance.

 

Key Updates in the Latest IRDAI Guidelines on Car Insurance (2024)

The following are the primary highlights of the most recent IRDAI Car Insurance guidelines:

• Third-party coverage in accordance with the 1988 Motor Vehicles Act.

• Updates on Own Damage Car Insurance, including processes for settling total losses.

• Flexibility in policy duration with options for yearly, long-term, and short-term periods.

• Standards for classifying vehicles that correspond to VAHAN database records.

• Updated claim settlement procedures to increase efficiency and transparency.

These updates guarantee that Car Insurance plans remain economically feasible, consumer-friendly, and legally compliant.

 

Guidelines for Third-Party Car Insurance Cover

According to the IRDAI's regulations on Car Insurance, all third-party insurance plans have to: 

• Provide the bare minimum of coverage required by the 1988 Motor Vehicles Act.

• Comply with the Act's central government-regulated premium rates.

• Cover the legal liabilities for paid drivers, conductors, and cleaners, as per the Employee Compensation Act of 1923,

• Issue insurance certificates as per Chapter XI of the Motor Vehicles Act.

These regulations ensure third-party insurance stays reasonably priced and provides adequate legal protection.

 

Guidelines for Comprehensive Car Insurance Cover

Comprehensive Car Insurance  covers both third-party liabilities and Own Damage (OD). The IRDAI guidelines for Car Insurance specify that:

• Settlement of total loss/constructive total loss (TL/CTL) must follow clear insurer-defined criteria.

• Policyholders can opt to retain the wreck and receive a cash-loss settlement (IDV minus salvage value).

• If a policyholder accepts a cash-loss settlement, the insurer can cancel the Own Damage (OD) Policy. Still, third-party coverage must be ensured until the vehicle is legally deregistered or reinsured.

 

General Exclusions in a Car Insurance Policy

While insurance covers damages and liabilities, the IRDAI Car Insurance rules specify certain exclusions:

• Damage due to illegal activities (e.g., drunk driving).

• Regular wear and tear of vehicle parts.

• Mechanical or electrical failures.

• Damage occurring outside Indian geographical limits.

• Consequences of nuclear risks or war-like events.
   

Depreciation & IDV Rules as Per IRDAI

The IRDAI Car Insurance depreciation framework outlines how a vehicle's Insured Declared Value (IDV) reduces over time.

IDV calculation is based on the manufacturer’s listed price minus depreciation.
 

Depreciation slabs:

• Up to 6 months – 5%

• 6 months – 1 year – 15%

• 1–2 years – 20%

• 2–3 years – 30%

• 3–4 years – 40%

• 4–5 years – 50%

 

IRDAI Rules for Total Loss

For total loss (TL) and constructive total loss (CTL) claims:

• The insurer’s Product Management Committee (PMC) determines TL/CTL criteria.

• Policyholders can opt to keep the wreck and receive a cash-loss settlement.

• Insurers must ensure continuity of third-party coverage if the policyholder retains the wreck.

 

Customer Turnaround Time for Claims and Grievances

To improve customer service, IRDAI claims settlement ratio for Car Insurance Policies must comply with:

• Speedy claim processing with standardised timelines.

• Grievance redressal mechanisms within defined timeframes.

• Transparent claim rejection policies with documented justifications.

 

IRDAI Rules for Car Insurance Renewal

Renewal guidelines under IRDAI include:

• Annual, long-term, and short-term policies are available for motor vehicle owners.

• Standalone Own Damage (SAOD) Policies must expire with third-party coverage.

• Insurers must offer SAOD coverage only if third-party insurance is active.

 

Expert Opinions on IRDAI’s Latest Guidelines

1. Regulating high commission payouts

IRDAI is tackling high commission payouts (up to 57%) to Motor Insurance Service Providers (MISPs) that contribute to increased premiums. Experts believe this will help lower costs for customers.

 

2. Usage-based add-ons

IRDAI has approved innovative 'Pay as You Drive' and 'Pay How You Drive' policies, adjusting premiums based on vehicle usage and driving behaviour. Experts, like T.A. Ramalingam from Bajaj Allianz, see this as a way to make Motor Insurance more affordable.

 

3. Promoting digital platforms

IRDAI is encouraging digital platforms like Bima Sugam to reduce commission rates, leading to more cost-effective policies for customers.
 

Conclusion

With these updated IRDAI guidelines for Car Insurance, policyholders can benefit from better claim processing, clear total loss rules, and flexible renewal options.
 

Looking for a reliable Car Insurance Policy that aligns with these new IRDAI guidelines? Shriram Car Insurance provides:

• Affordable plans with customisable add-ons.

• Speedy claim settlements with minimal documentation.

• No Claim Bonus benefits.

• Dedicated customer support.
   

Explore Shriram Car Insurance plans today and drive with peace of mind!
 

FAQs

1. How does IRDAI regulate Car Insurance in India?

In addition to standardising claim procedures and regulating premium prices for third-party liability insurance, IRDAI establishes the regulations and guidelines for Car Insurance Policies and ensures adherence to the Motor Vehicles Act of 1988.

 

2. Can I choose to retain my car after a total loss settlement?

Yes, policyholders may choose to keep the wreck and accept a cash-loss settlement under the most recent IRDAI regulations. However, third-party insurance can only continue if certain legal criteria are fulfilled, and insurers have the right to cancel Own Damage (OD) coverage.

 

3. What are the mandatory coverages as per IRDAI?

According to the Motor Vehicles Act of 1988, every automobile must carry third-party liability insurance. Although not mandatory, comprehensive coverage (Own Damage) is advised.

 

4. How does IRDAI regulate policy renewals?

Annual, long-term, and short-term insurance are all permitted under IRDAI. The duration of third-party coverage cannot be exceeded by Standalone Own Damage (SAOD) insurance.