Centre Does Away With Limit On Payouts By Firms
The premium for third party motor vehicle insurance is set to go up significantly as the Centre has agreed to do away with the cap on third party liability of insurance companies in case of grievous injuries or deaths in road crashes. The insurance regulator, Insurance Regulatory and Development Authority (IRDA), has proposed a nearly 50% hike in third party insurance premium for most categories of cars, trucks and two-wheelers for 2017-18.
It is mandatory for all vehicles to have third party insurance while insurance for own damage is optional. In comprehensive policies which have both components, the share of third party insurance is barely 30%. IRDA has proposed no increase in third party insurance premium only for a few vehicle categories such as Alto, Nano and Datsun Go in cars and Tata Ace, Tata 407, pick-up vans and Eicher mini trucks etc in the goods vehicles segment. No hike has also been proposed for ecarts. But it proposes to increase the premium of cars, which have 1,000 to 1,500 cc engines by almost 50%. A similar hike has been proposed for luxury and premium car models.
Sources said trends show the final hike is usually around 25-30% after consultations.There is a probability that insurance firms would push for another round of increase once the Motor Vehicle (Amendments) Bill is passed with the proviso that firms pay the entire compensation awarded by the motor vehicle claims tribunal (MACT). A parliamentary panel had recommended unlimited liability of insurance firms by rejecting the road transport ministry’s proposal to cap it. Sources in the insurance industry said at present, the average compensation is about Rs 5 lakh and that, too, is usually settled after months.
Road transport minister Nitin Gadkari said, “We want victims’ families to get quick relief. Once police files a motor accident case, the insurance company will approach the family with offer of Rs 10 lakh and Rs 5 lakh as compensation for death and injury , respectively. If they don’t accept, the matter will automatically go to MACT and the insurance company will pay the entire compensation.“
But there are objections to this. “The government should focus on how to shorten the process of cases in MACTs,“ said S PSingh of IFTRT, a Delhi-based think tank on transport issues.
Source : The Times Of India