The mandatory third-party motor insurance premium may increase once the Motor Vehicles (Amendment) Act gets the President’s assent.
In the proposed amendments, there is a substantial increase in compensation for accident victims. In case of death in hit-and-run cases, the compensation has been increased to Rs 2 lakh from Rs 25,000. For grievous injuries, the compensation proposed is Rs 50,000 against the current Rs 12,500. It also provides compensation up to Rs 10 lakh for road fatalities and in case of grievous injuries, the compensation to be paid can go up to Rs 5 lakh. Insurers will have to pay the compensation within 30 days from the date of receipt of record of settlement.
The penalty for driving a vehicle without insurance has been doubled to Rs 2,000 to ensure that every vehicle on the road has insurance. Also, if the owner of the vehicle in whose favour the insurance certificate is issued transfers the vehicle, the insurance company must be informed within 15 days of the transfer.
Moreover, the Motor Vehicles (Amendment) Bill has made provisions for cashless treatment during the golden hour of the accident. For many road accident victims, the period of first 45 minutes is the most crucial time within which they need aid.
The Bill proposes setting up of an accident fund which will be used for medical expenses of the grievous hurt till they stabilise. In fact, to provide instant medical care to road accident victims free of cost on national highways, the government had launched two pilot projects in 2014. In cases of people who have medical or life insurance cover, the payment made by the government will be deducted from the claim amount received. The Bill proposes to create the fund by collecting cess, grant or loan from the Centre.
S Thirunavukarasu, country head, Motor Underwriting and Claims, Royal Sundaram General Insurance, says the new Motor Vehicles (Amendment) Bill is a welcome step in improving safety and security on roads. “The introduction of a provision for capping the third-party liability is a welcome move in the industry. Overall, the amendments will pave the way for bringing in greater accountability among the various stakeholders which should augur well for a healthy and robust growth of the road transport sector,” he says.
Third-party motor insurance
The insurance regulator had increased the mandatory third-party motor premium for most category of vehicles in April this year. This year’s hike was the sixth one in six years as the regulator revises the mandatory cover rate every year after factoring the inflation. The motor business continued to be the largest non-life insurance segment with a share of over 44% and the segment reported growth rate of 10.5% in FY15, supported by the mandatory insurance requirement. Motor insurance comprises own-damage and third-party insurance.
The motor insurance portfolio for non-life insurance companies has been bleeding for many years now and past hikes have enabled insurers to cover some of the previous losses. The incurred claims ratio of the motor segment decreased to 77.14% in FY15 from the previous year’s ratio of 79.5%. Insurers want a cap on liability and a certain time period within which a claim can be filed, unlike the current scenario where the claim amount is unlimited and one can file the claim any time after the accident.