MUMBAI: IRDAI has operationalised the Supreme Court’s directive to restructure motor insurance into four distinct sections, separating mandatory third-party liability and owner-driver personal accident cover from optional occupant liability, additional personal accident and own-damage covers. The new framework, which comes into force on Dec 15, 2026, seeks to make customers aware of what they are buying, what they are not buying and how much each component costs, without changing the basic covers available under existing policies.The circular translates the court’s order in the case of National Insurance Company vs Thungala Dhana Laxmi into mandatory requirements for general insurers. The court had directed IRDAI, in consultation with the General Insurance Council and insurers, to introduce a four-layer structure for private cars and two-wheelers to help vehicle owners make informed choices.Under the framework, third-party liability remains mandatory. Legal liability to occupants or pillion riders, including employees of the insured, is optional. Personal accident cover for the owner-insured is mandatory, while cover for occupants, pillion riders and drivers other than the owner-driver is optional. Own-damage cover for the insured vehicle is also optional.To ensure uniformity across insurers, IRDAI has prescribed standard policy wordings based on drafts submitted by the General Insurance Council in consultation with the industry. Insurers must adopt these wordings and obtain a duly completed customer option form for every policy issued for a private car or two-wheeler. The form must record the covers selected by the customer and form part of the policy.The circular also requires insurers to issue a Customer Information Sheet at the point of sale and provide the option form for customers to select additional covers through online or offline channels. The policy schedule must separately disclose the actual coverage and premium charged under each section. The certificate of insurance must comply with the Central Motor Vehicles Rules, 1989.These requirements are intended to establish a documentary record of customer choices and make the cost of individual covers transparent, reducing ambiguity over whether a particular risk is insured.The framework also allows existing third-party policyholders to add legal liability cover for occupants during the policy period by paying an additional premium. This option must be exercised with the insurer that issued the third-party policy. The additional risk will commence from the date and time specified in the endorsement. Customers will not have to cancel their existing third-party policies to obtain the additional cover.While standardising the basic structure and policy wordings, IRDAI has allowed insurers to determine the pricing of own-damage covers in line with market conditions and continue to innovate on coverage. Insurers can also add or remove general exclusions and conditions based on the cover selected, provided they do not restrict the basic coverage prescribed under the four-layer structure.The circular also requires insurers to integrate the new structure with Bima Sugam by Dec 15, 2026, ensuring that the policies are available on the digital insurance marketplace from the date of implementation.The framework does not make all four sections compulsory. Third-party liability and the specified owner-insured personal accident cover remain mandatory, while occupant liability, additional personal accident cover and own-damage protection remain optional. Its central objective is to ensure that customers understand the coverage available and make a documented choice, backed by standardised policy terms and separate disclosure of premiums.
