In a bid to tighten the compliance of mandatory third party insurance of vehicles, which puts all road users at risk, the Supreme Court Committee on Road Safety has asked the insurance regulator IRDAI to offer mandatory third party three year insurance policy for cars and five-year policy for motorbikes at the time of sale and registration.
Third-party insurance covers the liability a third party by a vehicle owner during an accident and is mandatory in India.
Though driving any vehicle without third-party (TP) insurance is an offence and attracts a fine of up to Rs 1,000 with a possible jail term of three months, 50 per cent of vehicles plying on roads have currently no valid insurance- a large share of them were two-wheelers- against approximately 18 crore registered vehicles.
These vehicles pose a serious risk as accident victims have little chance of getting inadequate compensation, said SC panel.
According to data with the Union ministry of road transport and highways, two-wheelers account for a large number of fatal road accidents – 60-70% of the vehicles involved in these accidents are uninsured.
IRDAI has been pushing for multi-year insurance policies as many two-wheeler owners buy insurance only at the time of buying the vehicle and had allowed long-term motor third-party insurance policy with a three-year term.This means, two-wheeler owners don’t need to renew their motor insurance every year.
Irda had said the total premium charged for the third-party coverage would be thrice the annual premium for two-wheelers as decided by the regulator. Motor third-party premium is regulated by Irda and the regulator brings out revised rates for these policies every year, based on the claims experience.
General insurer are now offering multi-year policies that are cheaper than annual-renewal plans. Insurers give discounts ranging from 2%-6% on own-damage insurance for such plans.
Apart from the convenience, another added advantage is that multi-year motor policies will be exempt from IRDAI annual premium hikes, which on average could be between 10% and 15%.