Party For Insurers
Selling cars and bikes with multi-year covers is not the right way to ensure 100% vehicle insurance
About 60% of vehicles in India are uninsured. This means if one of them hits you, your chances of getting compensation are dim. It’s a sobering thought, but not shocking, because this was the case in 2012, in 2018, and remains so now. What’s interesting, though, is the stubbornness of this number. Vehicle sales in India have increased tremendously over the past two decades, so if only 40% owners care to buy insurance – even though it’s mandatory – what does it say about us as a people?
Supreme Court, like all right-minded citizens, is appalled by this state of affairs. We are the world’s road accident capital. Lakhs of people are injured and killed every year. The whole compensation mechanism breaks down without insurance. So, in 2018, SC came up with an answer to this problem. It ordered that every new car be sold with three years’ third-party cover, and new two-wheelers with five years’ cover. Third-party means someone, other than the owner, who is harmed by the offending vehicle.
This rule certainly gave insurers more money each year. But without behavioural change, a three-year cover is no good fourth year onwards. And as we saw, the 40:60 ratio of insured to uninsured vehicles didn’t budge. That means SC’s 2018 order failed as a behavioural nudge. But now, SC’s gone a step forward and increased mandatory third-party cover for new cars and two-wheelers to four years and six years, respectively. This kicks the insurance can further down the road, but at this rate we would need to start selling vehicles with life-time insurance cover, like road tax.
That’s a bad idea, for several reasons. First, the initial burden on buyers. Even three years is excessive. Second, paying insurers for 3, 4, 5, or, say, 15 years tomorrow, gives them a windfall. It would be different if govt retained the money and released it year by year, but even then it wouldn’t be in vehicle owners’ interest. The real problem is govt’s inability to track and punish those who don’t insure their vehicles. This shows lack of intent because govt’s Vahan database has all the details about a vehicle’s registration, PUC, insurance, pending challans, etc, and police can access these in real time. But there’s no crackdown to put fear of law in flouters’ hearts. SC has recommended use of tech to catch uninsured vehicles, and we agree with it. But selling mandatory multi-year insurance cover is not a good idea.
Disclaimer
Views expressed above are the author’s own.
