Poor renewals and low levels of penetration of general insurance products in the retail lines of business have prompted insurers to ask Insurance Regulatory and Development Authority (IRDA) to allow issuance of longer term policies with renewal every 3-5 years.
The retail lines of business include health, home, personal accident and motor insurance.
Currently general insurance products are renewed annually. However, some insurers issue health insurance policies up to a maximum of three years.
As per insurers ticket size is small in retail line of business so a longer term renewal will definitely be less cumbersome for customers.
For insurance companies, customer acquisition, printing and issuing of policies are big one-time costs.
For customers, long term policies offer better value as insurers propose to price them lower by factoring in the no-claims discount into the premium. Also, long term policies reduce the possibility of it lapsing.
However, IRDA has expressed some concerns regarding the longer term policies. According to IRDA long term policies must have proper accounting in place and adequate actuarial support to calculate premium on a long term basis.
According to estimates, nearly 70% of two-wheelers and 35% of four-wheelers are uninsured even though they are legally required to have a cover, which is a huge structural problem for insurers.
Insurers say that the third-party premium could be levied for a longer duration as one-time registration or road tax.
Longer term renewals would also be beneficial for two-wheelers, where ticket size is low and renewals are poor. Posted on January 18, 2013 by Akanksha
vinay mohanty
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