Inside the Insurance Bubble

A change in the norms governing auto insurance will come as a relief for automotive owners all over the country

Deciphering the changing laws for insurance

In September 2018, the Insurance regulatory and Development Authority of India (IrDAI) issued a directive requiring both car and twowheeler owners to buy personal accident cover of a value of rs 15 lakh at the cost of rs 750 by way of additional premium as part of their insurance bundle for their vehicles. this directive was given in the wake of the madras high Court’s order to increase the Compulsory personal Accident Cover (CpAC) from rs 1 lakh to rs 15 lakh because the honourable court felt that potential accident victims and their families could do with the additional financial assistance in case the worst occurred, since vehicle owners, especially those of the two-wheeled persuasion, were often under-insured, if at all.

this IrDAI directive, although wellmeaning, wasn’t exactly well thought-out. It did not take into consideration that a number of vehicle owners own comprehensive insurance policies that provide accidental cover and forcing everyone to buy CpAC as part of their vehicle insurance would mean these people would have to double the insurance and, correspondingly, double the expense to acquire it. Further redundancies in insurance would occur if an individual had two vehicles registered in his or her name, for, under this rule, that would again mean twice the cover for no reason. these flaws in the initial directive were brought up en masse by the citizenry, leading the regulatory authority to reassess their approach to enforcing the mandatory accident cover of rs 15 lakh.

the result of this reassessment is that now it is no longer mandatory to buy this bundled insurance that includes personal accident cover over and above the standard insurance. to clarify, personal accident insurance is still mandatory as per the insurance regulations; however, one will not be forced to buy it as a bundle any longer. Vehicle owners will be able to opt out of buying this cover as part of their vehicle insurance and can even acquire it as a stand-alone policy, if required.