The Supreme Court has said that long term third party liability insurance has to be made mandatory for four-wheelers and two-wheelers.
The apex court said this while referring to the recommendations of the Supreme Court Committee on Road Safety and it observed that over 100,000 people die in India every year in road accidents, reports Press Trust of India. It asked the IRDAI to decide the issue by 1 September.
The Supreme Court Committee, headed by former apex court judge Justice K S Radhakrishnan, has recommended that at the time of sale of two or four wheelers, third party insurance should be made mandatory for a period of five and three years respectively.
In its report, the committee said that around 180 million vehicles were plying the roads of the country of which only 60 million had motor third party liability insurance. This means that some victims of road accidents were not getting compensation where there was no third party cover for the vehicles involved in the accidents.
The panel also said they had detailed discussions with the Ministry of Road Transport and Highways, the IRDAI and the Department of Finance on this issue.
Industry sources say less than 45% of bikes and scooters are insured while only about 70% of four wheelers are insured. According to the Motor Vehicles Act, all vehicles running on Indian roads are mandatorily required to buy third party motor insurance. At present, insurance companies offer two-wheeler third party insurance for up to three years while car insurance has to be renewed every year. Every year, the IRDAI revises motor third party premium rates that take effect from 1 April.
Once the Supreme Court order is communicated to the IRDAI, the regulator will be required to issue a fresh set of premium rates for the two-year car insurance and five-year bike insurance in the motor third party category.
“We have less than two months to implement this order. There is no such product in the market at present. The bigger question is how the premium will be calculated,” said the underwriting head at a mid-sized private general insurer, referring to the Supreme Court determination.
Premium rates for a multi-year policy will be significantly higher. Insurance sources say it would not be a simple multiple of the premium for a one-year policy, and customers could be reluctant to spend a higher sum on the product.
It is estimated about 150,000 people lose their lives on Indian roads every year.