Motor insurance order upsets public, insurers

By S Ben Raja Published on Jul 31, 2018 04:10 PM IST

New Delhi / Chennai:  It has been just a few days after Supreme Court made a five-year third-party motor insurance mandatory for two-wheelers and a two-year cover compulsory for cars starting from 1 September.

But a huge number of motorists and insurers have voiced their dissent. While insurers cite the lack of time for calculating premium and implementation of the rule, motorists allege that the scheme will significantly increase vehicle running costs and will reduce their returns on investments (ROI).

It all started when Apex Court in an order delivered on 20 July said that all two wheelers sold in the country should have a mandatory five-year third-party motor insurance cover and cars with a two-year policy.

Not only that, the court gave just around a month deadline for implementing this rule.

It said that the scheme is to ensure that vehicles don’t remain uninsured as according to Motor Vehicles Act, all vehicles running on Indian roads are mandatorily required to buy third-party motor insurance.

Residents complained that insurance companies stick on to their rules more than doing business in an ethical manner. Raj Kumar, a resident of Camp Road junction, Tambaram, said, "Automobile insurance premiums have sky-rocketed. A third-party insurance for a car with an engine capacity of more than 1,500 cc is priced upwards of Rs 7,000 for one year while comprehensive insurance goes up to Rs 25,000. Couple this running cost with the hefty interest charged by the banks, the value of brand new cars bought with loans become zero in a matter of three-four years."

He backs his observation with his own experience.

"Around six months back, my comprehensively insured car suffered a crash. When I applied for the claim, they rejected it by citing lack of proper visibility of the chassis number and a couple of other things. If this is the case for comprehensive insurance, will they even pay heed to third-party claims? Just like equity mutual funds, insurance companies face a lot of risks. When the claims outweigh enrollment, companies land in losses. So, they try all means to limit claims," he explained.

The resident said that multi-year insurances don't provide proper returns.

"If a person wants to use his car just for an year, now he / she has to bear the second year cost too. Needless to say about motorcycles where the insurance should be for five years. If the policy money is with the owners, they would at least fetch them interests. But now, that has to be entirely forgotten," he added.

While vehicle owners have these woes, insurers fear about the limited time. Venkatesh, an employee of a city-based insurance company, said, "Very recently government framed its new premium regulations. At present, we are offering two-wheeler third-party insurance for up to three years while car insurance has to be renewed every year. Supreme Court's move is much awaited one but we require some more time to sort things out."

Biggest killers
Road accidents are the biggest killers in India. It is estimated about 150,000 people lose their lives on Indian roads every year. Sources say that less than 45 per cent of two wheelers are insured while only about 70 per cent cars are insured. Third-party insurance protects the vehicle owner against third party liabilities in case of an accident. Here, death or injury to pedestrians or other vehicle passengers is payable by insurance. Comprehensive insurance is optional and protects the individual's vehicle against damages.


Things customers need to note
* Read the document carefully and ask doubts whenever and wherever needed.

* Get a written statement from the agent while getting clarifications about sensitive claims.

* Approach the court for any dispute.


Premium matters
Every year, Insurance Regulatory and Development Authority of India (IRDAI) revises the motor third party premium from 1 April.

The changes in premium are on the basis of claims reported on a particular category of vehicle in the previous year and the engine capacity. Once the SC order is communicated to IRDAI, the regulator will be required to come out with a fresh set of rates for the two-year car insurance and five-year bike insurance in the motor third party category.