Traffic moves along a highway during morning rush hour in Delhi, India (Photographer: Kuni Takahashi/Bloomberg)

Supreme Court Makes Multi-Year Motor Insurance Plans Compulsory

The Supreme Court asked the insurance regulator to make it compulsory for all general insurers to provide multi-year third-party motor covers to curb the number of uninsured vehicles plying on the road.

The top court, in a July 20 order, said that cars should at least be covered for three years and two-wheelers for five years, either as a separate insurance policy or as part of the comprehensive cover. The order will be effective from Sep. 1. The court also asked the regulator to work with the police and online channels to push sale and renewal of the accident cover.

The order would increase motor insurance compliance as a lot of people, especially two-wheeler owners, tend to not renew their policies after the first year, said Santosh Singh, head of insurance research at brokerage firm Haitong Securities. It will also improve coverage in rural areas where there are fewer road transport inspectors to ensure compliance.

The decision came after a Supreme Court-appointed committee on road safety found that only one in every three vehicles—among 18 crore plying on Indian roads—is insured. This leads to accident victims or their kin not getting any compensation.

The Insurance and Regulatory Development Authority of India had allowed a two-year cover for bikes earlier, but it wasn’t mandatory. The Supreme Court order will now make motor insurance hassle-free as annual renewals will go away, said Anirudh Jain, head of insurance at financial services firm Centrum Group.

The existing third-party premiums, notified by the regulator from April 1, stand at:

  • Rs 1,850 to Rs 7,890 for cars
  • Rs 427 to Rs 2,323 for two-wheelers

“The rate, as it will now be applicable for three to five years, may be hiked by 5 percent to ensure that the product remains profitable for insurers,” said Jain.

Also read: Insurers To Seek Relief From Supreme Court On Making PUC Must For Motor Covers