New car, bike buyers will have to shell out more from Sept 1
A recent ruling by a Supreme Court bench headed by Justice MB Lokur and Deepak Gupta has mandated third-party insurance for four and two-wheeler vehicles from September 1 for a term of 3 and 5 years respectively. The Supreme Court had earlier appointed a committee, headed by a former Supreme Court Judge Justice KS Radhakrishnan, to suggest measures on road safety. The committee had recommended having a long-term third party insurance cover.
While purchasing either a four or a two-wheeler vehicle, the Act obligates the owner of the vehicle to procure third-party insurance for a period of one year, subsequent to which it is left to the owner whether he wants to renew the insurance policy or not. After the current ruling, the duration of 1 year has been extended to 3 and 5 years for four and two-wheeler vehicles respectively. This move is likely to increase the insurance cost while purchasing a new vehicle.
The committee highlighted that only 6 crore out of the 18 crore vehicles which ply on Indian roads have third party insurance. It also observed that over one lakh people die each year in road accidents, which is a matter of grave concern. According to the report, “Longer term third-party insurance cover at the time of purchase would ensure that the road accident victims do not suffer due to the fault of the owner in not renewing his or her policy every year.”
K. G. Krishnamoorthy Rao , Managing Director and Chief Executive Officer , Future Generali India Insurance Company Limited claims, “the recent order of Supreme Court that every new car sold should have a three year third party liability insurance cover and every new two wheeler sold should have a five year third party liability insurance cover is a welcome verdict. As of now a significant percentage of cars and two wheelers are not insured for the mandatory third party insurance because of which many times the common man who meets with a road accident involving such vehicles do not get adequate compensation.”
He added, “the challenge for the insurance industry to implement the order from 1st September is the readiness of the product and pricing to be approved by the regulator and time required for making changes in the IT systems of the companies.”
Motor insurance in India, among other laws, is governed by the Motor Vehicles Act, 1988. The Motor Vehicles Act, 1988, mandates insurance of motor vehicle to cover third-party risk. Third party means any person other than the owner or passenger involved in the accident; and third-party risk covers bodily injury, death, and damage to property of the third-party.
Under the Act, road accident compensation claims are decided by the Motor Accident Claims Tribunal. In case of fatal accidents, the Act contains a provision to provide Rs 5,00,000 with no upper limit, as interim relief to the family of the victim.