Chennai: The insurance regulator has recommended a simplified calculation for depreciation and sum insured under own damage motor insurance. The new calculation provides enhanced valuation for customers. The Insurance Regulatory and Development Authority of India has also suggested a few checks that are beneficial for the insurers.  

For brand new private cars aged up to three years, the sum insured shall represent the current day on-road price of the vehicle insured, including Invoice value, road tax and registration charges and value of all accessories fitted thereon by the manufacturer.

For vehicles beyond three years, sum insured will represent the current day manufacturer’s listed price of the vehicle insured, including value of all accessories fitted thereon by the manufacturer, and adjusted by age-wise depreciation as per new depreciation table. The new depreciation table is suggested for up to 15 years.

Beyond 7th year, sum insured shall be arrived at a mutually agreed value between the insured and the insurer. “The draft seems to focus on making life simpler and effective for consumers. Better value for customers in the initial three years where sum insured is equal to invoice value of car and post three years also basing SI basis depreciation on invoice value instead of depreciation on ex-showroom price,” said Sajja Praveen Chowdary, Head- Motor Insurance, Policy-bazaar.com.

For commercial vehicles, the sum insured shall represent the current day invoice value plus cost of body building, if any, and all accessories fitted thereon by the manufacturer adjusted for depreciation at the rate of 10 per cent per year or part thereof subject to maximum of 75 per cent. For Total Loss, Theft and Constructive Total Loss claims, the amount payable shall be the sum insured.

Partial Loss claims shall be payable subject to depreciation as per the new scale. Proportionate premium for reinstatement of sum insured from the date of loss till expiry shall be deducted from all partial loss claims. For Commercial and Miscella-neous and Special Type of Vehicles, partial loss claims shall be payable subject to depreciation as per the different scale suggested.

In addition to the existing provision, it is recommended that in all cases of total loss / constructive total loss claims and theft claims, the registration certificate (RC) of the vehicle shall be cancelled and claim shall be settled only after the insured surrenders such cancelled RC. The policy shall be cancelled without return of premium.

“From an industry perspective also, it puts in place various checks without which the insurance industry might not be able to sustain after a period of time given the fraudulent claims, etc. It puts in place minimum premium, man-datory deductible linkage to sum insured, cancellation of RC and insurance mandatory for total loss cases, claim intimation within 24 hours, etc,”said Chowdary.