Acknowledging the impact of higher insurance cost on vehicles, the Society of Indian Automobile Manufacturers (SIAM) has reached out to the insurance regulator IRDA suggesting some tweaks in the motor insurance norms.

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The SIAM has sought de-linking of personal accident cover (PA) from third party cover (TP) as TP cover increases vehicle's cost, sources in IRDA told CNBC-TV18.

The SIAM believes de-linking of PA cover from third party cover will allow vehicle owners to buy single year PA cover policies and pay the premium amount only for that one year and not up front for 3 and 5 years for private cars and two wheelers, respectively.

The IRDA is likely to go through the representation made by SIAM and issue a revised circular this week, said sources.

The development comes after the Supreme Court made a five-year third-party motor insurance mandatory for two-wheelers and a two-year policy for cars starting September 1.

Since the personal accident cover is a sub section of TP cover and is governed by the same rules, vehicle owners are also mandated to pay the PA premium up front for 3 years in case of private cars and 5 years for two wheelers.

On the directions of the Madras High Court, IRDA recently raised the minimum PA premium to Rs 750 per annum for private cars and two wheelers.

This would end up increasing the cost of private cars and two wheelers. Though the costs would not increase significantly, customers would have to pay that amount upfront. For price conscious customers, this is an irritant.

The impact on the buyers would be:

For private cars - Rs 2,250 (Rs 750 X 3)

For two wheelers - Rs 3,750 (Rs 750 x 5)

The increase in costs could further aggravate pain for automakers amid sluggish sales. Passenger vehicles sales in the first-half of FY19 moderated for the country’s top two carmakers, Maruti Suzuki India (MSIL) and Hyundai Motors India.

The sales in the two-wheelers category, however, improved with both Hero MotoCorp and Bajaj Autos recording pickup in sales during the period.

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First Published:Oct 9, 2018 11:24 AM IST