Why it makes sense to buy two-wheeler insurance

Mukesh Kumar, Executive Director, HDFC ERGO General Insurance Company Limited, talks about the many benefits of buying one

Two-wheelers are vehicles of convenience for everyone irrespective of the location or the gender of the rider. They are easy to drive and one of the most convenient means to negotiate the not-so-hospitable Indian roads and also an economical mode of transport for a vast population of the country. However, while they bring in convenience, they come with their own set of risks.

In the unfortunate event of an accident involving a two-wheeler or a motorcycle, the owner may be exposed to different types of risks.

The owner of the two-wheeler will not only be required to pay for the hospitalisation if s/he gets herself/himself injured, s/he will also be required to compensate the loss to the pedestrian who is injured or someone whose property has been damaged.

As per the Motor Vehicles Act of 1998, it is mandatory to take the motor insurance while purchasing any type of a vehicle -- be it a car or a two-wheeler. As a standard sales procedure, the first insurance comes with the purchase of the vehicle. However, it has been observed that the two-wheeler owners typically get somewhat careless about renewing the insurance on their motorcycle after a couple of claim-free years.

Some drivers consider their good driving skills as an excuse for not bothering with two-wheeler insurance. However, the nature of accidents and mishaps is such that they happen unannounced, to anyone, anywhere, anytime.

Despite best credentials as a safe driver, having two-wheeler insurance is a must for every two-wheeler owner because of the severity of today's roads traffic. And it’s not always the driver of the vehicle, who is responsible for the accident.

The heavy traffic can result in accidents with no fault of the driver. Even a seemingly minor damage to the vehicle or slight injury may involve a high cost to get fixed.

For obvious reasons, the number of vehicular accidents tends to go up during monsoons. With medical care getting expensive, even a small treatment can mean a big expense. A collision with another vehicle or severe injury to fellow passengers can be costly to the owner/driver of the two-wheeler.

Support in the form of a financial aid can bring down the burden of the problem, and with two-wheeler insurance, one can stay assured of that financial support in the event of an accident.

Two-wheeler insurance is not very expensive, and offers a range of benefits. A basic two-wheeler insurance covers for damage to the third-party liability. And a comprehensive two-wheeler insurance keeps the two-wheeler owner protected against damage caused by natural as well as man-made calamities, including the damage to the body or the property of the third-party.

Yet, the two-wheeler owners get somewhat complacent when it comes to renew their two-wheeler insurance, despite repeated reminders from the insurers. There have been instances of accidents having taken place to the vehicles shortly after the expiry of insurance.

Two-wheeler owners can now breathe easy. Insurance regulator Insurance Development Regulatory Authority (IRDA) has allowed the insurers to sell standalone Motor Third-Party Insurance for two-wheelers for periods of up to three years.

For two-wheeler owners, this means that they do not need to renew their insurance policies every year. Instead, now they can renew their third-party insurance policy once in three years.

As an added advantage, the long-term Motor Third Party Insurance for two-wheelers also protects the two-wheeler owners from the hikes for the next three years. As per the IRDA guidelines, the total premium charged for the third-party coverage would be thrice the annual third-party premiums and the insurers would not be allowed to revise these premiums (upwards or downwards) during the period of policy under any circumstances.

Also, once issued, the insurer is not allowed to cancel the standalone third-party cover in any circumstances except in case of total loss.

Essentially, long-term two-wheeler insurance is a win-win situation for the consumer as well as the insurers. Data suggests that almost 70-75 per cent two-wheelers are not insured despite the fact that it is mandatory. A lot of effort goes into the process of annual renewals, which has a substantial amount of cost attached to it in terms of calling the customer for reminder and courier charges for dispatching the policies etc.

A number of policyholders do not have the mandatory third-party motor insurance because they miss the expiry of their insurance and continue without the insurance. With the long-term third-party motor insurance, the policyholders do not need to worry about the expiry of their motor insurance for three years.

With inefficiencies related to annual renewals eliminated, the resulting cost-savings to insurers can be passed on to the customers in terms of discounts.