Third-party cover, while necessary, is not sufficient

Vehicle owners should take advantage of recent cost reductions and buy comprehensive motor insurance cover

The Insurance Regulatory and Development Authority of India (IRDAI) recently told general insurance companies to make third-party (TP) motor insurance easily available to customers. TP insurance cover is mandatory for all vehicles and the ones that do not have it can be impounded until the insurance documents are produced. While TP cover is the least a vehicle owner should buy, those who can afford comprehensive motor cover should opt for the latter.

The Supreme Court Committee on Road Safety has asked states and union territories to do periodic checks to see if vehicle owners have TP cover. Insurance companies often make purchasing such cover cumbersome. They are also at times reluctant to provide TP cover in areas that are highly accident-prone. “Insurers shall ensure the easy availability of motor TP insurance and in no case can a request for TP cover be denied,” the IRDAI directive said.

According to the Motor Vehicles Act, all public, private, and commercial vehicles must have TP insurance. A report by the General Insurance Council of India states that approximately 60 per cent of automobiles in India are uninsured. “People are reluctant to buy TP motor insurance policies because they see it as an avoidable expenditure. As the distances they travel are usually short, they consider buying such a policy futile. Some still don’t trust that the claim will be paid by the insurance company when it arises,” says Rajiv Kumar, managing director and chief executive officer, Universal Sompo General Insurance.

TP insurance provides coverage against any financial liability to the vehicle owner on account of causing death, disability, others kinds of physical injury, and damage to his vehicle or property. Insurance companies compensate the insured to the extent of their legal liabilities. The amount of compensation for damage to the vehicle or property is capped at a maximum of ~750,000, according to the Indian Motor Tariff guidelines. “Having TP insurance can save you from legal repercussions. It also gives peace of mind to anybody owning or driving a motor vehicle, especially if a traumatic situation arises,” Kumar says.

At the time of buying TP motor insurance, share all details relating to your vehicle. Also, make yourself familiar with what your policy covers.

Experts, however, say those who can afford should have comprehensive motor insurance cover. These plans cover both TP and own damages. They also cover theft and damages caused by natural calamities, such as earthquakes and cyclones. In the event of an accident, such comprehensive insurance plans minimise the financial burden on an individual. The average premium of such types of cover ranges from ~15,000 to 20,000 for non-premium vehicles.

Meanwhile, several insurance companies have reduced the Own Damage (OD) part of motor insurance premiums by 5-20 per cent. The reduction in premium prices is due to IRDAI's Motor Insurance Service Provider (MISP) guidelines, which were implemented from November 1, 2017. “The new regulations have created some space for insurers to increase OD discounts, which has resulted in reduced prices,” said Tarun Mathur, director, Policybazaar. Companies such as ICICI Lombard General Insurance, Universal Sompo General Insurance, and Bajaj Allianz General Insurance have reduced their premiums. “The reduction in prices has happened chiefly due to the impact of the gods and services tax," says Amitabh Jain, head, motor and health underwriting and claims, ICICI Lombard General Insurance. Vehicle owners opting for comprehensive cover should make the most of this reduction.