The Supreme Court of India has extended the duratoin of compulsory third-party insurance coverage of new vehicles by one year. Now, the third-party coverage for new cars will be of 4 years instead of 3 years, and the coverage for 2-wheelers has been extended from 5 years to 6 years.
The court also proposed a system to deny fuel to vehicles at fuel stations (petrol pumps) if they don’t have valid insurance. The apex body has further directed the IRDAI and the Ministry of Road Transport and Highways (MorTH) to consider a pilot project regarding this.
What This Means For Buyers?
Since third party insurance is mandatory under motor vehicle act, this decision will translates to enhance financial protection against third-party liabilities such as injury, death and property damage caused to others in case of an accident. It will also ensure that the vehicle remain insured for a longer duration without the risk of policy lapses due to missed renewals. However, this will also increase the overall upfront cost to buy a new vehicle, especially for budget conscious buyers.
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Background
The Insurance Regulatory and Development Authority of India (IRDAI) and General Insurance Council (GIC) had advised not to extend the thrid-party insurance coverage period. However, the apex court observed that a large number of vehicles were plying on Indian roads without third-party insurancem preventing accident victims and their families from receiving adequate compensation. Therefore, keeping road safety in mind, the court directed that this period be extended by one year.
Impact on The Industry
This decision is expected to improve compliance with insurance regulations and reduce the number of uninsured vehicles on Indian roads. Additionally, the insurance companies could benefit from the increased sales of multi-year plans.
This extended third-party coverage will be required to purchase buyers at the time of buying a new vehicle, along with optional coverage for passengers & pillion riders/occupants, personal accident cover for death or permanent disability of owner/driver/and other occupants, and cover against loss or damage to the insured vehicle.
