Penetration of Motor Insurance to increase Penetration of Motor Insurance to increase

Driving an uninsured car or motorcycle may soon cost you dear, if proposals given in the new Road Transport & Safety Bill are passed without changes by the Parliament. On the other hand, it sure will turn into a boom time for general insurance companies.

For a motorcyclist caught riding without an insurance policy, the penalty will be Rs 10,000. Owners of light motor vehicles and autorickshaws will have to cough up Rs 25,000, as per the new rules. Similarly, any car or a truck driver caught driving without the policy will have to pay as high as Rs 75,000. Compare this to a meager fine of Rs 1,000 for all vehicles currently in place under the law.



New Bill to replace Motors Vehicles Act



The draft version of the Bill was put on the ministry's website on September 13 to accumulate feedback from the general public. Reportedly, it has attracted widespread attention due to its proposals for stringent penalties with respect to traffic offences such as drunken driving and accidents in which children are killed.

The visible benefit of this new draft bill, if implemented without changes is that the fines for driving uninsured vehicles will be made compulsory and will drive up insurance penetration manifold . Vijay Kumar, Head of Motor Insurance at Bajaj Allianz General Insurance said, "This (the enhanced penalties) will increase penetration of motor insurance." Incidentally, the new bill will replace the ageing Motor Vehicles Act, 1988.



Interestingly, a study by New India Assurance Ltd. has shown that nearly 70 per cent of motorcycles and scooters on road are not insured. Similarly, about a third of the cars and trucks are uninsured as well. Insurance company officials say that penalties should go beyond fines and lead to loss of license for repeated violations. Echoing these sentiments, Sanjay Datta, Head of Motor Insurance at ICICI Lombard says, "More than the extent of fine, it is the ability not to drive that would be important for insurance companies. If the rules say that a three time motorcycle offender will lose his license, it will bring discipline."

The Insurance Regulatory & Development Authority is easing its rules to promote increase insurance compliance. It has allowed longer tenure policies, which include a three-year policy for two-wheelers, as well as third-party insurance. On the same lines, long term products for car insurance are also in the works. Insurance companies have suggested to the Government to limit third party liability at Rs 10 lakh. So far, liability for motor vehicles has been unlimited, though it is capped at Rs 5 lakh for aircraft and Rs 2 lakh for railways.

Apart from the above, the industry also wants the claim to be allowed under two jurisdictions-first, where the accident has happened and the second, where the vehicle is registered. In addition, the claim has to be filed within three years of the mishap occurrence. The Bill has also proposed setting up a motor accident fund to help grievously injured people and to compensate legal representatives of a victim.