IRDAI to Introduce Four-Layer Motor Insurance Structure from December 15

• Dushyant Sharma
• 06 Nov 2026
• 154 Views

On 3 November 2026, India’s insurance industry regulator, the Insurance Regulatory and Development Authority of India (IRDAI) issued a circular to introduce a four-layer structure for motor insurance policies that cover private cars and two-wheelers w.e.f. 15 December 2026. The circular conveys the Supreme Court's order in the case of National Insurance Company vs. Thungala Dhana Laxmi & Others and establishes mandatory requirements for general insurers. 

Under the new framework, the vehicle owners will get to choose different covers based on their needs. The move is intended to provide greater flexibility to customers when it comes to choosing their insurance protection and help them make informed decisions. 

How Will the Four-Layer Motor Insurance Structure Work?

Under IRDAI’s revised structure, the motor insurance policies will be split in four different sections, i.e., 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 mandates third-party liability insurance, while the other covers remain optional. However, this is subject to current regulations regarding compulsory personal accident insurance for owner-insured persons. 

Uniform Policy Wording to be Adopted by General Insurers

All the general insurance companies that provide motor insurance will be required to stick to the standardized policy wording for private vehicles, such as new cars and two-wheelers. 

Moreover, they will have to introduce a standard customer option form as well as a ‘Customer Information Sheet (CIS)’ so as to ensure that the policyholders understand the covers they are opting for in a clear and transparent manner.

Customers to Opt for Coverage Through Option Form

Insurers will be required to collect a completed option form from every customer purchasing a motor insurance policy. Policyholders must indicate their preferred coverage options by selecting the relevant choices whether online or offline. 

Furthermore, it will be mandatory to issue CIS at the time of sale. This document must clearly outline the coverage provided for each section of the policy along with the associated premiums.

The regulator stated that these measures will enhance transparency by offering customers a clear breakdown of various components of their motor insurance policies. Additionally, existing policyholders will have the option to add legal liability coverage for occupants or pillion riders while their policies remain active provided they pay an additional premium for the same. 

Insurers to Retain Flexibility in Pricing Own-Damage Policies

Although the policy structure and wording will need standardization, the insurance companies will continue to have the freedom to develop new coverage options and decide pricing for own-damage policies on the basis of market conditions.

The IRDAI circular said, “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).”

Source: Business Standard