Party For Insurers

Selling cars and bikes with insurance for many years is not the right way to make sure everyone has vehicle insurance

About 60% of vehicles in India do not have insurance. This means that if one of these vehicles hits you, it may be difficult for you to get compensation. This is worrying, but not surprising. The same thing happened in 2012 and 2018. Even though the number of cars and bikes on Indian roads has grown hugely, the share of insured vehicles has hardly changed. Only about 40% of vehicle owners buy insurance, even though it is compulsory.

The Supreme Court was also worried about this. India has a very large number of road accidents, and lakhs of people are injured or killed on its roads every year. Without insurance, it becomes much harder for accident victims to get compensation.

So, in 2018, the Supreme Court came up with a solution. It ordered that every new car must be sold with three years of third-party insurance, while every new two-wheeler must come with five years of such insurance. Third-party insurance pays for the damage or injury caused to someone else by your vehicle.

The rule was good news for insurance companies because it brought them more business. But it did not change people’s behaviour. Once the three- or five-year insurance period ended, many owners simply did not renew their policies. The ratio stayed at about 40% insured and 60% uninsured.

Now the Supreme Court has gone a step further. It has increased the required insurance period for new cars to four years and for new two-wheelers to six years. But this only pushes the problem into the future. If this continues, perhaps one day we will be selling cars and bikes with insurance for their entire lifetime, just like road tax.

That would be a bad idea for several reasons. First, buyers would have to pay a large amount of money upfront. Even three years of insurance can be expensive. Second, insurance companies would get a huge amount of money in advance if people had to pay for five, 10 or 15 years of insurance at once.

There is a much simpler solution. The government should find and punish people who drive uninsured vehicles.

The government already has a system called Vahan that stores information about vehicles, including their registration, pollution certificates, insurance and unpaid traffic fines. The police can access this information in real time. So, it should not be too difficult to identify vehicles without insurance.

The Supreme Court has also suggested using technology to catch uninsured vehicles. We agree. Technology can help make sure people follow the law.

But making people buy many years of insurance when they buy a new car or bike is not the right solution. The government needs to make sure that people renew their insurance every year. If there is a real fear of being caught and punished, more people are likely to follow the rules.

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