Irdai introduces four-layer motor insurance structure from December 15

Motor insurance will have four separate covers, including third-party liability, cover for passengers, personal accident cover and protection against damage to the insured vehicle

The Insurance Regulatory and Development Authority of India (Irdai) on Tuesday introduced a four-layer structure for motor insurance policies covering private cars and two-wheelers, effective December 15, 2026. The new framework will allow vehicle owners to select different covers based on their requirements.

 

The move aims to give customers greater flexibility in choosing their insurance protection and help them make informed decisions, the regulator said.

 

Under the revised structure, motor insurance policies will be divided into four separate sections: third-party liability, legal liability towards occupants or pillion riders, personal accident cover, and loss of or damage to the insured vehicle (own-damage cover).

 

The framework makes third-party liability insurance mandatory, while the remaining covers will be optional. However, this will be subject to existing rules on compulsory personal accident insurance for owner-insured persons.

 

Insurers to adopt uniform policy wording

 

All general insurers offering motor insurance will have to follow standardised policy wording for private vehicles, including new cars and two-wheelers.

 

They will also be required to introduce a standard customer option form and a 'Customer Information Sheet' (CIS) to ensure that policyholders clearly understand the covers they are choosing.

 

The circular has been issued in compliance with the Supreme Court's order in the case of National Insurance Company Ltd vs Thungala Dhana Laxmi & Others, Irdai said.

 

Customers must select covers through option form

 

Insurers will have to collect a completed option form from every customer buying a motor insurance policy. Policyholders will need to select their preferred covers by ticking the relevant options, either online or offline.

 

Issuing the Customer Information Sheet at the time of sale will also be compulsory. The document must clearly specify the coverage provided under each section and the corresponding premium charged.

 

The regulator said this would improve transparency by giving customers a clear breakdown of the different components of their motor insurance policies.

 

Existing policyholders will also be allowed to add legal liability cover for occupants or pillion riders while their policies are still active, subject to payment of an additional premium.

 

Insurers retain flexibility in pricing own-damage cover

 

While the policy structure and wording will be standardised, insurers will retain the freedom to develop new coverage options and set prices for own-damage policies based on market conditions.

 

“The insurers are directed to ensure the integration of the four-layer motor insurance policy structure with Bima Sugam is completed simultaneously so that their policies are available from Bima Sugam from the same date (December 15, 2026)," the circular said.