All New Vehicles Sold To Have Third-Party Insurance Coverage -3 Years For Cars And 5 Years For Two Wheelers [Read Circular]

With the Supreme Court refusing to extend the deadline, all new vehicles sold from 1st September 2018, should have mandatory third-party insurance coverageWhile considering a public interest litigation seeking guidelines for improving road safety filed by S. Rajaseekaran, Chairman & Head of Orthopedic Department, Ganga Hospital, Coimbatore, the bench comprising of Justice Madan B. Lokur and Justice Deepak Gupta, on 20th July, had ordered that third-party insurance coverage of three years for cars and five years for two-wheelers should be mandatory for all vehicles sold from September 1.The direction was issued by the bench on the basis of decisions taken by the Supreme Court Committee on Road Safety, headed by former SC judge Justice K. S Radhakrishnan. The bench noted that in a meeting held by Committee on 26th March 2018, it was recorded that there are about 18 crore vehicles plying on the road and only about 6 crore vehicles have the mandatory third-party cover, which meant that 66% of the vehicles were plying without third party insurance.The applications filed by General Insurance Council to extend the deadline were listed on 31st August. The bench dismissed the applications refusing to extend the deadline.IRDA CircularThe Insurance Regulatory and Development Authority of India has issued a circular complying with the order of the top court. It reads: Offer only three-year Motor Third-Party Insurance covers for new cars and five-year motor third party insurance policies for new two-wheelers. The premium has to be collected for the entire term (three years or five years as the case may be) at the time of sale of insurance but would be recognised on a yearly basis. In other words, it shall be recognised for each year as 1/nof total premium as Gross Written Premium during that year where ‘n’ is the term of the policy. Thus, the premium for the year shall only be recognised as income and the remaining premium shall be treated as “Premium Deposit” or “Advance Premium”. Currently, as far as Motor Own Damage Insurance is concerned, Package Policies (i.e. comprehensive covers) are available wherein two components are covered—Motor Third Party Liability and Motor Own Damage cover. After the introduction of long-term Motor Third-Party Insurance for new cars and new two-wheelers, an insured may be given the following two options: Long-term Package cover offering both Motor Third-Party Insurance and Own Damage insurance for three years or five years as the case may be OR a bundled cover with a three-year or five-year term (as applicable) for the third party component and a one-year term for the Own Damage. No Motor Third-Party Insurance may be cancelled by either the insurer or the insured except on the following grounds: Double Insurance Vehicle not in use anymore because of Total Loss or Constructive Total Loss In the event the vehicle is sold and/or transferred.Read the Circular Here

All New Vehicles Sold To Have Third-Party Insurance Coverage -3 Years For Cars And 5 Years For Two Wheelers [Read Circular]

Ashok Kini

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