Motor vehicle accidents are one of the major causes of death and injuries in India. About 1.5 lakh people die every year in five lakh road accidents in the country, according to the ministry of road and transport. Consequently, India also sees around 3 lakh third-party motor insurance (TP) cases being registered in courts every year. In any given year, courts and tribunals across India settle about 2.5 lakh such cases.
The Indian government has recently passed the Motor Vehicle Amendment Bill 2016 in Lok Sabha. The Bill brings in major amendments to the 30-year-old Motor Vehicle Act. Certain amendments emphasise on third party (TP) cover offered under motor insurance policies. Third party insurance cover is compulsory by law since it addresses the crucial aspect of liability arising out of any damage to property or life due to an accident.
The Bill seeks to get every stakeholder to take up more responsibility by distributing the liabilities to ensure accountability for road safety. Another significant reason that makes it pertinent for every individual to understand the implications of these newly proposed amendments is that it may not be your fault on the road but you can still get embroiled in a case involving damages to a third party.
Penalties have been increased for traffic violations along with doubling the fine to Rs 2,000 for plying on the roads without a valid insurance. What is equally important to know is that it introduces specific timelines for faster processing of TP insurance claims. It directs the victim to file such application within six months of the incident and the insurance company to make an offer to the claimant within 30 days of receiving the requisite information. If the claimant accepts the offer the insurer is liable to make payments within 30 days. In case the claimant does not agree with the compensation being provided, the application is referred to the claims tribunal to schedule a hearing.
Steps have been taken for a relook at the payment structure for faster disbursal. In cases where the person driving the vehicle is not at fault, it has fixed the minimum compensation to Rs 2.5 lakh for grievous injuries and Rs 5 lakh for death. However, the Bill grants unlimited liability and compensation for cases where it is proved that the driver was at fault. It has also increased the compensation amount for hit-and-run cases. Now, in case of death in such cases the compensation has been increased to Rs 2 lakh from Rs 25,000 earlier and in case of grievous injuries it is Rs 50,000 instead of Rs 12,500 earlier.
You might also want to see this:
At present, TP motor insurance is the only portfolio for insurers where the tariffs are determined by the insurance regulator and the losses for insurers run in thousands of crores every year. The Bill gives power to the central government to prescribe ‘a base premium’ and the liability of an insurer in relation to such premium. Here, insurance companies will be allowed to offer a TP cover where the compensation will be capped and those who want their insurer to cover them against unlimited liabilities may have to shell out more premium. Insurers are awaiting further clarity on this subject; till such time the structure and premium remains unaltered.
Through these amendments, apart from bringing in accountability the government has tried to bring about changes in the way TP motor insurance compensation is structured. It is a positive attempt towards streamlining the process. Further, steps like immediate cashless treatment ensure that the consumer’s interests are protected even as it tries to plug leakages to ensure that the motor insurance industry does not continue to suffer heavy losses.
The writer is head, Motor Insurance, Bajaj Allianz General Insurance.