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How does the Motor Vehicles (Amendment) Bill of 2019 impact motor insurance?

By Finserv MARKETS - Sep 13,2019
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Implications Of The Revised Mv Act 177 On Motor Insurance.

Though India has the world’s largest two-wheeler market and is the fourth largest automobile market in the world, it still lags far behind when it comes to motor vehicle insurance penetration. Owing to a large number of vehicles on the road, lack of stringent rules and no fool-proof system to enforce rules, there are millions of vehicles that ply on Indian roads without motor vehicle insurance.

Will the passing of the Motor Vehicles (Amendment) Bill change the equation? How does the Bill impact motor insurance in India? Let’s find out.

Compulsory insurance for all road users

While this does not have a direct impact on the various types of motor insurance, it does have an impact on the life of road users. The government’s decision to constitute a Motor Vehicle Accident Fund is a great move. It will not only provide compulsory insurance cover for death and injury to road victims but also the cashless treatment of road accident victims within 1 hour of injury, also called the golden hour.

Third-party insurance

One of the biggest impacts of the Bill is on third-party motor insurance. While the earlier version of the Bill had capped the maximum liability at Rs. 10 lakh, the amended Bill has removed the cap. Now there are no maximum limits on third party insurance liability.

It should be noted that third-party motor vehicle insurance is mandatory by law. Yet, more than 60% of vehicles ply on Indian roads without mandatory third-party motor insurance.

While vehicle buyers have to shell out more while buying a new vehicle due to the mandatory purchase of third-party insurance for five years, renewing various types of motor insurance is not that costly. For instance, you can insure a two-wheeler with Bajaj Allianz motor insurance available on Finserv MARKETS by spending as low as Rs. 1,389 a year.

Compensation for victims

The government has proposed to increase the minimum compensation for the family of a victim killed in a hit-and-run accident from Rs. 25,000 to Rs. 2 Lakh. Compensation for grievously injured victims has also been increased from Rs. 12,500 to Rs. 50,000.

Exoneration from liability

The Motor Vehicles (Amendment) Bill also enables insurers to be released from their liability to provide coverage in case of non-receipt of premium from the insured according to proposed Section 150

Stiffer penalties for non-renewal of vehicle insurance

After the passing of the MVAB, traffic violators driving their vehicles with a lapsed insurance policy will have to pay a penalty of Rs. 2,000. Earlier the fine was Rs. 1,000. The government hopes that it will encourage more vehicle owners to buy and renew various types of motor insurance and penetration will increase. Whether it will be effective or not, it’s too early to say.

If you want to avoid paying higher penalties and believe that driving without motor insurance is risky, renew your policy today. With Bajaj Allianz motor insurance available on Finserv MARKETS you are assured of cash-free services at more than 4,000 partner garages across the country. If a garage is not part of the network, Bajaj Allianz motor insurance will still pay 75% of the repair expenses.

In parting, the Motor Vehicles (Amendment) Bill is a great initiative from the government to increase road safety and we may certainly see the positive results in the near future. However, there is still more work to be done in terms of increasing all types of motor insurance penetration in India – whether it’s two-wheeler insurance or four wheeler insurance.

One solution to increase insurance penetration in the country could be the introduction of a collaborative mechanism between the Ministry of Road Transport and Highways (MoRTH) and various motor insurance companies in India. As part of the collaboration, insurance companies can share the data of vehicle owners whose motor insurance is about to expire or has already expired with MoRTH.

Then, MoRTH can use an online system to send SMS and email alerts to vehicle owners to renew their motor insurance within a certain timeframe, failing which they will have to pay a penalty. With the use of a simple collaborative system connected online to a database, the government can achieve much in increasing compliance and improving motor insurance penetration in the country.

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