The Insurance Regulatory and Development Authority (IRDA) may allow the insurance companies to offer car insurance policies with 5-year tenure. According to a news report, the insurance regulator is “considering a proposal to allow insurers to offer policies with a one-time, five-year cover and is expected to issue fresh guidelines on such long-term products.” These policies could come cheaper, too.
Speaking on the same lines, one of the IRDA official said that companies can start giving out such policies in two wheeler segment first, and based on the experience, similar products for commercial vehicles can be launched, the report stated.
The report further reads that IRDA also intends to use this long-term policy cover to promote insurance, especially in rural areas. The regulator feels that, “if we have a long-term product right at the inception, it may also promote the insurance culture," said the report.
The latest data, as mentioned in the news report, shows that insurance penetration in the country has fallen to 3.96% in 2012-13 from 5.2% in 2009-10. General insurance penetration in the country stands at 0.78%.
This initiative comes in when the government is planning to open 49% of insurance sector for foreign direct investment. Currently, we have 17 private sector and four PSU general insurance companies in India.
The general insurance companies are of the opinion that “such a product will boost the renewal business, which is quite low in rural areas.”