Ever since the country has picked itself from the coronavirus crisis, the automotive industry has been trying really hard to get back on its feet. And to do so, the manufacturers have remodeled their business pattern and the market has seen drastic changes. Almost all the manufacturers have started their own digital sales platform to reach consumers and potential buyers along with offering lucrative deals to boost customer sentiment. These initiatives help the manufacturers sell their products while reducing the risk of coronavirus spread. In addition to that, the Indian Insurance Regulatory and Development Authority of India (IRDAI) will be withdrawing its mandatory long-term insurance package plans. This will directly impact the on-road prices of vehicles as there will be a reduction of prices.
The long term-insurance cover for cars and bikes was introduced three years ago. It made a mandatory rule that buyers must purchase combined insurance of three years and five years in case of cars and two- respectively. Thist covered their own damage along with third-party insurance.
How does this lower the price of cars and bikes?
New vehicle owners only need to purchase a comprehensive cover for one year. Third party insurance remains mandatory for three and five years in case of four-wheelers and two-wheelers.
A circular issued by the IRDAI in June stated that “Effective September 01, the insurers shall make available stand-alone annual Own Damage covers (including stand-alone OD cover for fire and/ or theft if opted by the policyholder), for cars and two-wheelers, both new and old,”
It also mentioned that the policyholder can renew the own damage component of a bundled cover due on September 1 or after the mentioned date with the same insurer or a different one as it seems fit by the policyholder.
This will certainly help in giving the nudge to the automotive sector that is struggling to find its feet due to the after-effects of the COVID-19 pandemic. The silver lining here is, people are now opting to buy entry-level cars and bikes. The risk of contracting the Corona virus on public transport like buses, trains, taxis is higher as compared to private transport. This consumer mentality is definitely providing a vantage point for all the manufacturers that make entry-level products in the market. And we can expect to see a rise in demand for entry-level cars and bikes in the near future.