Insurance firms are doubling their motor-insurance policy-writing capacities as those without requisite cover are lining up to insure their vehicles after India announced stiff penalties for breaches of traffic laws. Scooters and motorcycles attract fines as high as Rs 6,000 against insurance costs of Rs 1,300, and such stiff penalties are forcing them to insure two-wheelers.
The cost of insurance is less than penalties under the new Motor Vehicles Act. Average insurance premium for two-wheelers is Rs 1,300 against a penalty of Rs 2,000 for the first offence, and Rs 4,000 for a repeat offence. Similarly, the average insurance premium for a private car is Rs 7,000.
“The demand has gone up 7.5 times,” said Tarun Mathur of Policybazaar. “This would reduce the number of uninsured vehicles. Private cars have seen a jump of 2.2 times.” Last year, the Supreme Court had mandated long-term third-party cover. Even then, many older vehicles were not covered and not been able to compensate for third parties. “We have seen a spike and those uninsured vehicles are getting renewed,” said Sanjay Datta, head of underwriting at ICICI Lombard General Insurance. “The majority of two-wheelers after the first year would drop out.”
The penalty for driving a vehicle without insurance policy has been increased from Rs 1,000 to Rs 2,000 and/or imprisonment up to three months, for the first offence.
The fine for the second offence is Rs 4,000 and/or imprisonment up to three months. Out of a total premium income of Rs 1.56 lakh crore, the motor insurance premium is 30 percent or Rs 60,000 crore worth of business for insurers.
News Source: Economic Times, Url: https://bit.ly/2nNV9rs