IRDAI Mandates Four-Layer Motor Insurance Structure Starting 15 December
New regulatory framework offers vehicle owners modular coverage options for cars and two-wheelers.
1Regulatory Shift in Insurance
The Insurance Regulatory and Development Authority of India has introduced a mandatory four-layer structure for private vehicle insurance. Effective 15 December 2026, this framework covers third-party liability, legal liability to occupants, personal accident, and own damage. The policy aims to provide vehicle owners with greater transparency regarding their specific insurance protection choices.
2Supreme Court Legal Basis
This structural change follows a specific directive from the Supreme Court in the case of National Insurance Company Ltd. vs Smt. Thungala Dhana Laxmi Others. The court mandated a clear, segmented approach to motor insurance to ensure that policyholders understand the distinct components of their coverage, moving away from bundled, opaque policy offerings.
3Modular Coverage Selection Process
Insurers must provide a customer option form for both online and offline purchases. While third-party liability remains mandatory, policyholders can now selectively opt for legal liability to occupants and own damage covers. This modular approach allows owners to tailor their insurance protection based on individual needs rather than accepting a standardized, one-size-fits-all policy.
4Updating Existing Policy Coverage
Existing policyholders are not required to cancel their current third-party insurance to access these new options. They can request additional coverage under section II by paying an extra premium to their current insurer. The added protection becomes effective only upon the issuance of an official endorsement document specifying the exact date and time of coverage.
5Transparency and Pricing Requirements
Insurers are now required to transparently list the premium charged for each individual section within the policy schedule. This granular breakdown ensures customers know exactly what they are paying for. Additionally, companies must issue a Customer Information Sheet at the point of sale to further clarify the terms and conditions of the selected coverage.
6Integration with Bima Sugam
The regulatory body has directed all general insurers to integrate this new four-layer structure with the Bima Sugam platform. This ensures that the updated policy options are accessible to consumers through the digital infrastructure starting 15 December. This integration is a key step in digitizing and standardizing the motor insurance buying experience nationwide.
7Market Pricing and Innovation
While the framework mandates a specific structure, insurers retain the freedom to innovate and determine the pricing of own damage covers based on market forces. Companies must ensure these pricing strategies do not restrict the basic coverage levels prescribed by the new framework, maintaining a balance between competitive market dynamics and essential consumer protection.
8Scope of Regulatory Application
These new rules apply to all general insurers operating within the private car and two-wheeler segments. Stand-alone health insurers and specialized insurance providers are excluded from this mandate. All policies issued from 15 December 2026 must strictly adhere to these uniform policy wordings and the mandatory customer option form requirements to remain compliant.