Stepping into potential peril: Long-term car insurance assurance with noble beginnings
Uninsured Victims and Motor Insurance: A Looming Concern
In the world of motor insurance, a troubling issue has come to light: the potential for victims to remain uninsured due to exclusions in policies. This issue, which can lead to lengthy litigation and occasional pay-and-recover orders in motor accident tribunals, has been highlighted in a recent discussion.
Under the Motor Vehicles Act, 1988, it is mandatory in India for vehicles to have at least third-party insurance to cover liability arising from injury or death to third parties and damage to their property. However, the Act does not automatically cover gratuitous passengers in a private car or pillion riders on a two-wheeler, as per Section 147 of the Act.
This gap in coverage has left a large class of victims uninsured, even as vehicle owners assume they are fully protected. Gratuitous occupants or pillion riders find themselves outside both covers unless the owner had taken add-ons or "unnamed passenger" endorsements in the first year.
The Supreme Court mandated long-term third-party motor insurance policies from 2018, with a duration of three years for cars and five years for two-wheelers. This long-term policy regime allows buyers of new vehicles to combine a multi-year third-party cover with a one-year own damage (OD) cover.
However, disputes over these uninsured victims often arise, particularly in scenarios where the OD cover is switched to another insurer in the second year. In such scenarios, the original insurer retains the long-term third-party risk. For instance, if an accident occurs, the original insurer covers statutory third-party claims, while the new OD insurer pays only for the vehicle's own damage.
Narasimhan Vijayaraghavan, a practicing advocate in the Madras High Court, has emphasized the importance of clear communication about exclusions in motor insurance policies to prevent misunderstandings and injustice. He also suggests that comprehensive coverage (including unnamed passengers and pillion riders) should be the default, not an optional add-on.
Moreover, there is a lack of consistency or uniformity in interpretations of motor insurance policies, leading to disputes and lengthy litigation. To address this issue, immediate regulatory clarity from the Insurance Regulatory and Development Authority of India (IRDAI) or a decision on this issue from the Supreme Court is needed.
Insurers should also be required to disclose coverage gaps upfront in plain language. This would ensure that vehicle owners are fully aware of the coverage they have and the potential risks they face.
The IRDAI governs motor insurance policies and has mandated key changes such as bundled insurance for new vehicles. They prescribe premium rates for third-party insurance, but comprehensive insurance offerings vary by insurer and can include additional benefits beyond the statutory minimum.
In conclusion, comprehensive motor insurance in India must cover third-party liabilities including injuries or death to unnamed passengers and pillion riders. Beyond the statutory minimum of third-party insurance, comprehensive policies offer broader own damage coverage at the discretion of the insurer and policyholder. Bundled multi-year third-party coverage is mandatory for new vehicles, reinforcing compliance with these regulations. Clear and straightforward communication about exclusions is crucial to prevent "bungled policies" in motor insurance and ensure that all road users are adequately protected.
- In the realm of motor insurance and policy-and-legislation, it's significant to emphasize the need for comprehensive insurance coverage that includes unnamed passengers and pillion riders, as misunderstandings and injustice may occur due to exclusions in standard policies, as highlighted by Narasimhan Vijayaraghavan.
- With disputes often arising from uninsured victims in the business of motor insurance, clear and general-news worthy solutions are essential, such as immediate regulatory clarity from the Insurance Regulatory and Development Authority of India (IRDAI) or a decision from the Supreme Court, as well as the requirement for insurers to disclose coverage gaps upfront in plain language to ensure adequate protection for all road users.
