As per the guidelines of the Insurance Regulatory and Development Authority (IRDAI) issued in the month of September, insurance companies were asked to increase the sum insured of ‘Compulsory Personal Accident (CPA) cover for owner-driver’ component in a motor policy (for both car & two wheelers) to Rs 15 lakh, amounting to a fixed premium of Rs 750 per annum. A registered owner of an insured vehicle is known as the ‘Owner-Driver’ in a motor policy and is eligible for a CPA component if he is carrying a valid driving license. As per this new directive, all motor policies were supposed to include personal accident protection that would cover the owner-driver for Rs 15 lakh in case of death due to an accident while driving. The Capital Sum Insured (CSI) under this section for motorised two-wheelers and private cars/commercial vehicles was increased from the current amount, i.e. Rs 1 lakh and Rs 2 lakh, respectively.
Further, through a fresh circular issued in the month of October, IRDAI made it quite clear that while buying insurance for a brand new car or two-wheeler, it is completely the choice of the owner-driver to opt for either a one-year compulsory personal accident cover or long-term CPA. This is because while buying a policy for a new vehicle, it is now mandatory to buy at least a 3-year liability or TP policy for car and 5-year liability/TP policy for a two-wheeler. The insurers were also directed by IRDAI that they have to ensure that the voluntary option is available for a customer to opt for one year CPA or a multi-year CPA. However, within two months of issuing the guidelines, IRDAI received feedback from various quarters about customers who already have a standalone personal accident cover bought from somewhere else. To add to the fact, many owner-drivers may own more than one vehicle which makes the said component redundant in his subsequent motor policies.
Therefore, after a detailed examination of the issues, in order to benefit the consumers, IRDAI has come out with a circular by unbundling the CPA component from the motor policies. It means that effective Jan 1, 2019, customers may buy the product either with their motor policy or separately from any insurer as a general personal accident product. The same personal accident cover will be valid for any number of vehicles owned by an owner-driver. So, if any person who already has a separate standalone PA cover of more than or equal to Rs 15 lakh, then there is no need for him to purchase the compulsory PA cover as a part of the motor insurance or vice-versa. In other words, compulsory PA cover for the owner-driver component under motor insurance will be made optional. It will now be the prerogative of a customer to opt for the said cover. Simply put, if you do not wish to take the PA cover under motor insurance, you can simply opt out of that option while taking a motor insurance.
Effective 1st January 2019, in view of the closeness of date of implementation, IRDAI has allowed the insurers to price the product in accordance with their individual general pricing method. However, the IRDAI even made it very clear that if anytime the authority did not find the pricing approach in line with the actuarial principles, required directions may be issued by the authority. So, from the next month onwards, the practice of offering bundled CPA cover under the motor insurance will be withdrawn and it will be replaced with CPA cover with the permission of purchasing the same from any registered insurer or insurance aggregator.
The insurance coverage under the stand-alone CPA will extend to all the vehicles under the same owner name and will be valid for one year. Most importantly, the coverage under the stand-alone CPA would continue to be specified under Death and Permanent Disability (Total and Partial) tariff. As a regular Personal Accident (PA) cover also includes cover against motor accidents, there is no need for customers to buy a separate CPA cover.