Strap: This move could address the issue of vehicles plying without insurance after one year of buying the vehicle.
Supreme Court of India in its order passed on July 20, 2018 has directed all the general insurance companies to issue a three year third party insurance cover for new cars and five years third party insurance cover for two wheelers from September 1, 2018. This move could give much needed relief to insurers as well as to the policyholders as many of them don’t renew the policy after it gets expired in one year.
Hon’ble Supreme Court in its order has mentioned that, “In a meeting held by the Supreme Court Committee on Road Safety held on 26th March, 2018, it is recorded that there are about 18 crore vehicles plying on the road and only about 6 crore vehicles have the mandatory third party cover. In other words, 66% vehicles are running on the road without any third party insurance cover and the victims of accidents including those who have died and their legal representatives are not getting compensation because the vehicles are not insured.”
However court has made it very clear that, this rule will be applicable only for third party insurance covers and only for new vehicle insurance. A comprehensive Auto Insurance policy have two components, the own damage (OD) and third party (TP). While SC has mentioned that new rules apply only to TP, insurers can deal with comprehensive policy and give option to the owner of the vehicle to decide which policy should be taken except that the third party insurance which is mandatory. Learned counsel for the General Insurance Council says that Insurance Regulatory and Development Authority of India (Irdai) may be directed to clear and finalize the product immediately.
Even now several General Insurers were selling three year long term two wheeler vehicle insurance policy. But now with this order, General Insurance companies can issue two policies, one being TP for long term and another OD which can be renewed every year. This move will bring in higher premiums for the Insurance Companies, but from the policyholder’s point of view they would be also be paying higher premiums upfront for three to five years. Third Party premium rates are decided by the the regulator for every year, now they will have to give the rates for the three and five years for four wheelers and two wheeler vehicles very soon.
However one should check the premiums before buying comprehensive cover from the dealers. They usually charge higher premiums, one can always look at the web aggregators selling such policies, which can be bought within minutes and also are cheap compared to the policy sold by dealers. Now with this order coming in, we hope that insurance penetration for vehicles improve in the country which can give benefits to the policyholder in case there is a claim.