Supreme Court Asks Insurance Companies, IRDAI To Explore 'Uniform' Motor Vehicle Policies To Avoid Consumers' Confusion

The Supreme Court today asked the Insurance Regulatory and Development Authority of India (IRDAI) and 22 Insurance Companies to explore the possibility of having a Uniform Insurance Policy to better protect people in motor accident cases.A bench of Justices Sanjay Karol and Prashant Kumar Mishra was dealing with the plea of National Insurance Company Limited against a Telangana High Court order which directed it to pay the respondent-claimants compensation amount of Rs.10 lakhs (approx.) alongwith interest.Seemingly, the Court's concern stemmed from the fact that different insurance companies have different insurance policies, which use distinct words and provide varied coverage. It previously called for information on policy profile of the insurance companies, alongwith coverage, and on seeing the diversity in the definition of different types of policies across different insurance companies, felt that there should be uniformity. For context, under the Motor Vehicles Act, there are stated to be 3 types of policies - the liability cover (third-party liability), standalone own-damage cover (for vehicle) and comprehensive (third-party and vehicle). But apparently, different insurance companies define the package policies differently. Coupled with lack of consumer awareness about policies and their terms, this results in accident claims being left unsettled despite payment of premiums and victims being deprived of compensations for years.During the hearing, the bench flagged lack of consumer awareness and reluctance on the part of Insurers to settle claims at pre-litigation stage as key issues. Further, it impleaded the Union of India (through the Ministry of Road Transport and Highways) in the matter and stressed that IRDAI, being the regulator, has an important role and would be doing a "great service to the nation" if it can follow through with the suggestions.Speaking on the Supreme Court's experience with Motor Accident Claims Tribunal (MACT) matters in the last 8-9 months, Justice Karol remarked, "our experience in MACT matters is that there's a reluctance on the part of the insurer to settle the claims at pre-litigation stage...there's strong opposition by insurer at first level of adjudication...Opposition even at stage of first appeal (High Court)...further, inordinate delay on part of insurer to challenge findings of fact by MACT/first appellate court".The judge lamented that "8-10 years is the normal lifespan of a litigation in an MACT matter" and emphasized over the impact of the same on the public exchequer. "When matter comes to us, we find there is increase of amount of compensation…plus payment of interest etc. All this is a drainage on public exchequer…consumer is not even aware of the various policies which are available by different insurance companies", Justice Karol said."We are no policy makers, but is it not possible for you all to sit together and [come up with] a uniform policy? For you to make consumers aware about what policies are available?" the judge posed to the General Managers of IRDAI, Insurance Companies and GI Council.Underlining a need for better consumer awareness and immediate redressal of grievances in accident cases, Justice Karol also conveyed, "please think of what all commonalities can be there in your insurance policies. Maybe you can have a one-time measure to better protect consumers…you have to make owner aware…you have to tell what difference is there in insurance coverage".The matter has been listed after 2 weeks. At request, the Court has exempted personal appearance of the General Managers of Insurance Companies. In their place, senior level executive officers may appear. Additional Solicitor General Archana Pathak Dave shall assist on behalf of the Union.To briefly put facts of the case, the husband of respondent No.1 died in 1996 due to a motor accident. The car that he met with the accident in was insured with the petitioner Company. In 2003, respondent No.1, along with her 2 children, filed a claim petition seeking compensation of Rs.10 lakhs. She alleged that the deceased died due to negligent driving by the driver of a lorry that hit his car.The petitioner however contested the claim before the Motor Accident Claim Tribunal saying that the policy issued by it was a comprehensive Private Car Package Policy, which did not cover the owner (deceased), as he was not a third party to the policy. According to the petitioner, the deceased was travelling in his own car as a passenger and the policy only indemnified the claimants for any liability towards a third party.In 2009, the MACT dismissed the claim petition, observing that the policy did not cover the deceased/owner of the vehicle, as no extra premium was paid to cover personal risk of the vehicle owner. Aggrieved, the claimants approached the High Court.In 2024, the High Court held the claimants entitled to compensation, noting that the policy issued was a comprehensive policy, which covered even...

Supreme Court Asks Insurance Companies, IRDAI To Explore 'Uniform' Motor Vehicle Policies To Avoid Consumers' Confusion

Debby Jain

The Court also lamented that 8-10 years is the 'normal' lifespan of motor accident claim cases.

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