With nearly 57% of vehicles on Indian roads uninsured, insurance regulator IRDAI has asked general insurers to consult with transport authorities in 28 states and eight union territories about providing mandatory coverage for uninsured vehicles.
The Insurance Information Bureau of India (IIB), established by the IRDAI, has reported that uninsured vehicles continue to be a major concern in India, with 57% of vehicles on the road being uninsured, with 17 states reporting more than 50% uninsured vehicles.
According to Vahan, the Ministry of Road Transport and Highways’ technology platform, the total number of vehicles registered to date is 33.68 crore. This means that more than 19 crore vehicles on Indian roads are uninsured.
According to Vahan, the Ministry of Road Transport and Highways’ tech platform, the total number of vehicles registered to date is 33.68 crore. This means that over 19 crore vehicles on Indian roads are uninsured.
The issue of vehicle insurance was discussed during a two-day conclave of industry CEOs and the IRDAI last week. The regulator has devised strategies for insurers to implement in order for the country to achieve full insurability in some segments, including motor, by 2027.
The new strategy will benefit both state governments and general insurers because collecting fines from defaulting vehicle owners will provide a significant source of revenue for state governments, while insurers will gain more business from insuring such vehicles.
According to an official source, the new drive will begin in a month and will be completed by FY2023-24.
The fine for driving without insurance is Rs 2,000 for the first offense and Rs 4,000 for subsequent offenses under the Amended Motor Vehicles Act (MVA) of 2019. It could also result in a three-month prison sentence at the discretion of the law. The fine for “driving without insurance” is imposed under Section 196.
According to the MVA, third-party (TP) liability insurance is required for all motor vehicles, but vehicle non-insurance is a harsh reality. A third-party insurance policy is a policy that protects the car owner/driver from legal or accidental liability, financial loss, or property damage. The policy also protects the owner/driver in the event of a third-party injury or death caused by the vehicle.
According to the IIB report, six states — Maharashtra, Tamil Nadu, Uttar Pradesh, Karnataka, Gujarat, and Kerala — contribute nearly half of the total policies and claims. The motor is the second largest line of business (after health) in the general insurance industry, with a gross underwrote premium of Rs 65,363 crore in the ten months ended January 2023, representing a 15.96% growth rate.
“The average settlement amount for death claims in FY 2019-20 was Rs 914,181 and for injury claims, it was Rs 265,115, and both showed an increase over the previous year. The highest average for death claims was in Kerala at Rs 12.31 lakh and lowest in West Bengal at Rs 6.3 lakh,” according to the IIB report. Generally, the Union Territories and the Southern States had a high average as compared to other states. The uninsured vehicles largely consist of two-wheelers and this is quite obvious as nearly 75 percent of the total vehicles in India consist of two-wheelers. In this class over 60 percent of the vehicles remain uninsured whereas cars are largely insured and the uninsured numbers are quite low at around 10 percent, IIB said.
The percentage of vehicles that do not renew their insurance after the first year is alarmingly high, at 52% on average for the years studied, owing to the fact that most two-wheelers fall out of the insurance net at the time of the first renewal of the insurance policy, according to the report.