The Insurance Regulatory and Development Authority of India (IRDAI) passed a mandate in 2018 that vehicles which would be bought on or after 1st September 2018 should carry long term third party coverage. With the passing of the mandate insurance companies reformed their motor insurance policies to comply with the changed rules. Today, if your clients buy a new vehicle, they would have to buy long term third party coverage on the vehicle to comply with the legal rules. For cars, the coverage tenure is 3 years while for bikes it is 5 years.
To buy long term coverage on their vehicles, your clients have the following alternatives –
- They can buy a long term third party only policy on their vehicles. In such cases, only third party liability would be covered for the mandated period of 3 or 5 years (depending on the type of vehicle). The damages suffered by the vehicle would not be covered by the policy.
- They can buy a long term comprehensive motor insurance policy. This policy would cover both third party liability and the damages suffered by the vehicle for a period of 3 or 5 years depending on the vehicle being insured.
- They can buy a bundled policy for their vehicles. In a bundled policy third party coverage would be offered for the compulsory period of 3 or 5 years while own damage coverage would be offered for one year. Thereafter, your clients can renew the own damage cover annually by buying a standalone own damage policy either from the same insurance company or from another insurance company.
This long term coverage is beneficial for your clients as well as for you. Let’s understand how –
Benefits of long term plans for your clients
If your clients invest in a long term motor insurance policy, here are the benefits which they can avail –
- No hassles of annual renewals
Since the policy provides long term coverage, your clients would not have to get the policy renewed annually. This reduces the hassles of renewals and your clients can enjoy uninterrupted coverage for a long period.
- Less chance of lapse
When motor insurance plans are renewed annually, customers might forget the renewal date or fail to renew the policy on time. This results in lapse which is bad for vehicle owners. With long term policies, annual renewals are not needed. The chances of lapse, therefore, reduce and your customers can enjoy continuous coverage over the long term period.
- Lower premiums
IRDA reviews and amends the third party premium rates every year. However, when your clients buy a long term motor insurance policy, the third party premium rates are locked in for the coverage duration. Even if IRDAI increases the third party rates over the coverage duration, the rates under your clients’ policy would not change. Your clients would, therefore, be able to enjoy lower premiums if the third party premiums increase in future.
- Preservation of no claim bonus
Your clients lose their accumulated no claim bonus if they make a claim in their annual motor insurance policies. However, long term policies provide a relief. In long term plans, the no claim bonus does not become nil even if a claim is made over the coverage duration. The bonus is simply reduced thereby allowing your clients a premium discount when they renew the policies even after a claim.
- Bundled plans are affordable
If your clients buy a bundled long term plan, the premium rates are also affordable. They would simply pay a long term premium for third party coverage while premium for own damage coverage would be payable for one year. This would make the plan affordable while at the same time the IRDAI rules would be followed.
Benefits of long term plans for POSPs (Point of Sale Person)
Besides your clients, even you can benefit from selling long term motor insurance plans. You can benefit in the following ways –
- Higher commissions
Since the premium of long term motor insurance plans is higher, you can earn higher commissions by selling such plans.
- Offering better products to clients
Long term plans have become compulsory and when you educate your clients about the different long term coverage options available, you can sell the most suitable plan to your clients. This would not only fulfil your clients’ coverage needs, it would also generate trust. Your clients might give you referrals and trust you to fulfil all their customer needs. This trust would ultimately lead to a growth of your insurance business promising higher incomes in future.
If your clients are investing in a new bike or car for themselves, inform them about the need of long term motor insurance plans. Show them the benefit of buying such policies and the options available under long term plans. A happy and satisfied customer would ultimately boost your business and help you get higher commissions.
