The spectre of heavy penalties under the amended Motor Vehicles Act has resulted in a windfall of sorts for insurance companies—a surge in demand for motor covers.
Several insurers have reported a rise in enquiries and sales. “We have seen a growth of over 30%in sales across channels— agency as well as online channels— this month,” says Rajeev Chawdhary, Executive VP, IFFCO Tokio General Insurance. “Enquiries through the online channel have nearly doubled in the past month,” adds Roopam Asthana, CEO and Wholetime Director, Liberty General Insurance.
This is not surprising given the steep penalty that awaits those driving a vehicle without the mandatory third-party liability cover. Such individuals will have to cough up Rs 2,000 the first time they are caught. Repeat offenders will have to pay Rs 4,000. “In case of many two-wheelers, the premium is lower than the penalties,” notes Anik Jain, Co-founder and CEO, Symbo Insurance, an online intermediary.
Last year, the Supreme Court issued an order making long-term third-party liability covers mandatory. It was found that over one-third of registered vehicles on the road were not insured. A large part of the blame lay with two-wheeler owners who fail to renew their policies after the first year. Subsequently, the Insurance Regulatory and Development Authority of India (Irdai) directed insurers to offer long-term third-party liability covers for new vehicles last year. With the amended Motor Vehicles Act coming into force now, such vehicle-owners have nowhere to hide.
Third-party cover is mandatory, but many don’t have one
- MUMBAI: 24%
- DELHI: 28%
- BENGALURU: 25%
- OVERALL: 26%
Percentage of respondents who said their policies have lapsed.
If you wish to simply renew the third-party liability component, you will not have to go through any elaborate process. “In such cases, there is no inspection and the policy is issued immediately,” says Chawdhary. Renewing a lapsed, or break-in, own damage element of a comprehensive cover is slightly more elaborate. However, it has become far simpler now, thanks to the use of technology by insurers and online aggregators.
Until a few years ago, it was a time-consuming affair as the vehicle had to be physically inspected by insurers’ surveyors prior to policy issuance. “There are three models insurers currently follow. One, where the process is completed without any self-inspection as insurers tend to waive this requirement in case of policies where the break has not exceeded 90 days,” says Jain of Symbo Insurance.
Renewing your policy within 90 days of the lapsation has another advantage: you will be entitled to the accumulated noclaim bonus. Any delay beyond this period will, however, mean losing out on the NCB, resulting in higher premium outgo. The longer the break, the higher the price to pay. Some insurers do not extend useful add-ons like zero depreciation cover or engine protect cover to vehicles that have been uninsured for a longer period.
Then, there is the self-inspection model, where insurance-seekers upload pictures of their vehicles for inspection through insurers’ official apps or links. “The link is sent to the insurance-seeker’s mobile phone. They simply have to record and upload the video,” says Asthana. This will serve as proof in future. “A recorded video reduces the chances of disputes (on own damage claims) at the time of claim settlement,” adds Sajja Praveen Chowdary, Business Head, Motor Insurance, Policybazaar.com.
The purpose is to minimise the scope for disputes on pre-existing damages at the time of claim settlement. “Disputes cannot arise in case of thirdparty claims as it’s the motor tribunal that takes the call,” adds Chowdary. The policy is issued once the inspection is completed and the premium paid.
Stiff penalties, strict compliance
- Penalty under the Motor Vehicles (Amendment) Act for using an uninsured vehicle: Rs 2,000
- Penalty for repeat offenders: Rs 4,000
Penalties are effective deterrents
|City||Caught by traffic police for not having valid insurance (%)||Bought insurance after being penalised* (%)|
*Out of respondents who admitted to facing a rap from traffic authorities. Source: COCO by DHFL survey 2019 where over 1,000 vehicle-owners were polled
Read the fine print
Usually, minor damages to your vehicles are ignored by insurers while evaluating your own damage proposal. However, the final decision will rest with the insurer who will take a call based on their underwriting policy. “If your vehicle has more than four minor dents, your policy proposal could be rejected.
Likewise, a single major dent or a single crack on windshield too, could reduce the chances of issuance drastically,” points out Chowdary. Once the policy is issued, however, the exclusions and other conditions are largely similar to those of a regular policy. “Only pre-existing damages, as recorded at the time of inspection and policy issuance, are not covered,” says Jain. Therefore, maintain a record of the pictures or video shared with the insurer or aggregator during the policy purchase process.
This apart, keep an eye on the date when the policy comes into force. In some cases, it could be deferred. “A third party cover-only policy in case of break-in will be effective on a T+1 or a T+3 basis (one or three days post the execution of the transaction). This is to eliminate any scope of misuse by some who may decide to buy the policy after an accident,” explains Chowdary.
Finally, ensure that you do not repeat the mistake of letting a motor policy lapse to avoid the hassles. Not only will you have to shell out heavily penalties, but also compensation in case your car is involved in an accident where another individual (the third-party) suffers injuries or damages.
Also, go through your policy document carefully to understand the tenure of your own damage component. “Many policyholders who opted for a three-year third party liability and oneyear own damage cover last year are under the impression that the latter, too, is long-term in nature, which may not be the case,” says Asthana.