Massive number of vehicles ply on road without valid insurance policy; IRDAI worried

Debasish Panda, head of the Insurance Regulatory and Development Authority (IRDAI), India's insurance regulator, is worried that half of the country's vehicles lack a valid insurance policy despite the same being mandatory under the Motor Vehicles Act. 

IRDAI had expressed a similar concern in the past, pointing out the lack of proper insurance for vehicles in India.

Speaking at a summit organised by the National Insurance Academy (NIA) in Mumbai on October 10, Panda said more than 50 per cent of vehicles remain uninsured.

“Although the insurance sector has been expanding at an 11 per cent annual rate for the past five years, more has to be done to emphasise the value of insurance as a financial and social safety net for all citizens of India. Only then can this sector help improve the economy and the nation,” he said.

Both two and four-wheeler vehicle owners in India are required by the Motor Vehicle Act to carry motor insurance on their automobile or motorcycle. If found driving without a current insurance policy, the owner could face fines and/or jail time of up to 3 months. In case of an accident, causing fatalities, this would invoke other relevant sections and with severe punishment.

According to the Insurance Information Bureau of India's (IIBI) most recent Motor Annual Report, which was published in 2019–20, uninsured vehicles continue to be a serious problem in India, with 57 per cent of the vehicles on the road being uninsured, which is a similar percentage to the previous year (2018–2019). 17 states reported more than 50 per cent uninsured vehicles.

As per IRDAI officials, the uninsured vehicles are led by two-wheelers, most of which do not renew the motor insurance policy after it lapses. As per their data, over 60 per cent of the vehicles are uninsured in Maharashtra, Telangana, Chhattisgarh, Madhya Pradesh, Rajasthan, Punjab, Arunachal Pradesh, Nagaland, Manipur, and Meghalaya.

Assam, Delhi, and Kerala, on the other hand, have the most insured vehicles on road.

Of the over 25.33 crore vehicles on the road in India as in March 2020, the percentage of uninsured vehicles was nearly 56 per cent, whereas in 2018-19, of the nearly 23.12 crore vehicles on road, it was 57 per cent, the IIBI report said, adding that due to the impact of steps by IRDAI (like some long-term policy initiatives), the percentage of renewals has increased by around 10 per cent. Two-wheelers still make up the majority of these uninsured vehicles, with rates as high as 66 per cent.

“The number of uninsured vehicles has not significantly decreased as a result, and the uninsured rate has remained relatively stable compared to the past years. Although renewals have increased, the effects of long-term policies' tenure expiring are yet to be determined,” Gurdeep Singh, who deals with insurance and underwriting matters, said.

Experts explained that the reason for uninsured vehicles, mostly two-wheelers, was that the renewal of motor vehicle insurance was not being taken seriously. “They don't renew it on time and as a result, the status of their insurance plan becomes inactive,” Nitin Dossa of the Western India Automobile Association said.

Third-party insurance is required by Section 146 of the Motor Vehicles Act of 1988; however, it is not contingent on purchasing it from the dealer at the time of purchase.

Despite their best efforts, it is not mandatory under the law for buyers to get a motor insurance plan from a two-wheeler or car dealer.

In India, having automobile insurance is required, and for good reason. Given the enormous number of motor vehicle accidents that occur in India, it becomes even more crucial, and the rising number of accidents is a figure to be concerned about.

Meanwhile, IRDAI has established a 21-member committee to examine the possibility of providing long-term insurance policies as insurers continue to explore ways to have every car covered by insurance by offering them enticing and affordable packages.

The committee, which has representatives from the general insurance sector, the regulatory side, and the banking side, will examine the pricing and accounting framework for automobile, health, and property insurance.