Auto Zone: 50% vehicles are uninsured!

Sanjay Khurana

MORE than 50 per cent of vehicles on Indian roads are operating without the mandatory third-party insurance, Union Minister of State for Finance Bhagwat Karad disclosed in Parliament last year. According to the Vahan dashboard of the Ministry of Road Transport and Highways, there were over 36 crore registered vehicles in the country as of December 26, 2023. Of these, approximately 18 crore were uninsured.

“Third-party motor insurance is mandatory in India. However, over 50 per cent (mostly in smaller cities, towns, semi-urban and rural areas) remain uninsured. Many factors such as lack of awareness, financial position of vehicle owners and non-compliance by the authorities concerned are responsible for this. As a result, often, accident victims are unable to get adequate compensation,” says Pawan K Taneja, CEO, K-Secure, an insurance brokerage firm based in Chandigarh.

Penalty for driving without insurance

• Driving a vehicle without a valid insurance policy is a serious offence, and the offender is expected to pay a fine as prescribed under the Motor Vehicles Act, 1988.
• First-time offence: Rs 2,000 or imprisonment for up to three months or both.
• Subsequent offence: The penalty increases up to Rs 4,000 or imprisonment for up to three months, or both.

The Motor Vehicles Act mandates that all motor vehicles must have a valid insurance policy. There are mainly two types of motor insurance:

Third-party liability insurance: This is mandatory and covers the legal liability of the vehicle owner towards third parties for injury, death or damages.

Types of insurance

• Besides bumper-to-bumper (or nil depreciation) insurance, there are various types of additional riders available at extra cost. These include engine protection cover, consumables’ protection, invoice protection, key and lock protection and gear protection.
• The additional riders are available between Rs 2,000 and Rs 10,000, depending upon the cost of vehicle.

Comprehensive insurance: While not mandatory, it provides broader coverage, including damage to your own vehicle, along with third-party coverage.

It’s crucial for vehicle owners to comply with these insurance requirements outlined in the Motor Vehicles Act to ensure legal and financial protection in case of accidents. It’s advisable to stay updated on any amendments or changes to the Act that may occur over time.

Man Singh Bhatia, a senior executive working with National Insurance Company Ltd, says: “The Supreme Court in its order dated July 20, 2018, directed that the third-party insurance cover for new cars and two-wheelers should be mandatory for a period of three years and five years, respectively. The court observed that it was up to the owner of the vehicle to decide which policy should be taken, except that third-party insurance is mandatory.”

People are not aware of this and there is a huge communication gap, especially in smaller cities, towns and villages, adds Bhatia. “People don’t even get the insurance renewed of small commercial vehicles such as three-wheelers, the Bolero pickup and Tata Ace (popularly known as ‘chotta hathi’), which are common modes of goods transport for smaller distances across the country.”

Motor vehicles not having an insurance policy pose a threat to road users. Some of the potential dangers are listed below:

Legal consequences: Non-compliance of mandatory insurance laws can result in legal penalties, fines, or even imprisonment.

Financial risk: Without insurance, you bear the entire financial burden of any damage to your vehicle or injuries to yourself or others in case of an accident. Repair costs and medical expenses can be substantial.

Liability issues: In the absence of insurance, you may be personally responsible for compensating third parties for injuries or damage caused by your vehicle. This can lead to a significant financial strain.

Lack of coverage for own vehicle: Without insurance, you won’t have coverage for damage to your own vehicle in the event of an accident, theft, or natural disasters.

Inability to claim no-claim bonus: If you maintain a good claims record with insurance, you may be eligible for a no-claim bonus, which reduces your premium. Without insurance, you also miss out on this benefit.

Unprotected against uninsured drivers: If you’re involved in an accident with an uninsured driver, you might face difficulties in recovering damages from them.

In short, not insuring motor vehicles can expose you to legal, financial and personal risks. It’s crucial to have proper insurance coverage to protect yourself and others on the road.

Increasing awareness about the regular renewal of motor vehicle insurance in India is important for ensuring that vehicle owners maintain continuous coverage.

Public awareness campaigns can be launched through various media channels and social media platforms. Use of slogans, infographics and real-life scenarios can be used to convey the importance of timely insurance renewals.

Insurance companies and automobile dealers can collaborate with government agencies to incorporate insurance renewal reminders in official communications related to vehicle registration and licensing. Even NGOs can be engaged to increase awareness about the renewal of motor vehicle insurance regularly.

Insurance companies can proactively reach out to policyholders through SMS, emails, and phone calls to remind them about upcoming renewals. They can offer incentives/discounts for early renewals to encourage policyholders to renew their insurance promptly.

The government and insurance companies can also develop and promote mobile apps that provide reminders for insurance renewals. These apps can offer a user-friendly interface for quick and easy renewal processes.

Additionally, insurance companies and government can partner with automobile service centres to display posters or distribute pamphlets emphasising the importance of insurance coverage.

Insurance firms and social organisations can also conduct workshops and seminars in collaboration with educational institutions, driving schools and community organisations to educate individuals about the legal and financial implications of driving without insurance.

Social media influencers/celebrities can also be roped in for campaigns to reach a broader audience.

By employing a combination of these strategies, there can be a significant improvement in the awareness and compliance of motor vehicle insurance renewals. The key is to use a multi-channel approach and create engaging and informative content to capture the attention of vehicle owners.