According to Mr. G Srinivasan, Chairman and Managing Director of New India Assurance, customers do not buy a comprehensive policy especially when they have old vehicle. Most of them only buy third party cover once the loan of the vehicle is paid. The premiums on third party cover are merely 10 per cent of the comprehensive policy. The customers are mandated to buy an insurance policy for their vehicle.
When an insurer sells a comprehensive motor policy, it covers both liabilities, third party and own damage. However insurers also sell standalone policy which cover only third party damage.
Standalone third party liability cover is cheaper than a comprehensive policy.
"Most customers either stop renewing or refrain from buying a comprehensive policy as soon as they repay their vehicle loans," says Mr. Sanjay Dutta of ICICI Lombard. The average tenure of a car loan is four to five years.
Insurers say, they don't deny a loan to somebody who has bought only a third-party cover. But, they usually insist on a comprehensive cover. Standalone third-party covers were also called ‘One-time act only' policies. These policies were issued only for two-wheelers, covering third-party damage only.
"These policies got wiped off from the market due to pricing issues and insurers couldn't sustain those low levels of premiums," added Mr. Srinivasan.