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.

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