Irdai has come out with a new proposal to determine the sum insured in case of motor vehicle including both 2-wheeler as well as private cars. In the proposal made, the working group on 'Product Structure for Motor Own Damage cover' has made a recommendation of 2 options for computing sum insured for personal cars.
The exposure draft on the recommendation of the working group said that in case of brand new private cars up to 3 years said the sum insured "shall represent the current day on-road price of the vehicle insured including invoice value, road tax & registration charges and value of all accessories fitted thereon by the manufacturer", the exposure draft based on the recommendations of the working group said.
In case of vehicles that are old by more than 3 years, there shall be a gradual increase in depreciation from 40-60% for up to 7 years. And beyond this time, the insurers can be approached for negotiation with respect to the sum insured value. In the current regime, a complex process is followed for determining the current value of the car which has been simplified in the proposal made.
In second option, the sum insured would be reduced from 95% for up to six months to 40 per cent for up to 7 years. So, here also after a term of 7 years, the rate of depreciation or sum insured is negotiable.
For the two-wheelers, there is suggested age-based depreciation policy. In case of CVs, sum insured should be representative of current invoice value and the cost of body building, if any together with all the accessories i.e. adjusted for depreciation @ rate of 10% per year or part thereof subject to maximum of 75%.