IRDAI Orders Four-Layer Motor Insurance Structure for Private Cars and Two-Wheelers from December 15

Key facts

• The Insurance Regulatory and Development Authority of India (IRDAI) has mandated a four-tier structure for motor insurance covering private cars and two-wheelers from December 15.
• The four layers comprise mandatory third-party liability cover, optional legal liability towards occupants and pillion riders, personal accident cover, and optional own-damage protection.
• In a circular issued on Tuesday, IRDAI said all general insurers, except standalone health insurers and specialised insurers, must adopt uniform policy wordings and issue a mandatory customer option form and Customer Information Sheet (CIS) at the point of sale.
• The changes operationalise a Supreme Court directive in the case of National Insurance Company vs Thungala Dhana Laxmi, which sought a four-layer structure to help vehicle owners make informed choices.
• Personal accident cover for the owner-insured is mandatory, while additional cover for occupants, pillion riders and drivers other than the owner-insured is optional.
• Legal liability towards occupants, including pillion riders and employees of the insured, is optional; it excludes the owner-insured and their immediate family members, and the number of occupants covered is restricted to the vehicle's registered seating capacity.
• Existing third-party policyholders can add occupant liability cover during the policy period by paying an additional premium, with the insurer that issued the policy, without cancelling the existing policy.
• The customer option form must record the covers selected by the customer and form part of the policy, and the policy schedule must separately disclose the actual coverage and premium charged under each section.
• IRDAI has allowed insurers to determine own-damage cover pricing in line with market conditions and to add or remove general exclusions, provided the basic coverage of the four-layer structure is not restricted.
• Insurers must integrate the new structure with Bima Sugam by December 15, making policies available on the digital insurance marketplace from the date of implementation.