If the concern that a vehicle owner would not renew the insurance cover after expiry is behind the diktat for a five-year cover, it begs the question, what guarantees renewal after five years?
For the Madras High Court to mandate five years’ bumper-to-bumper motor insurance on the purchase of a new car after September 1 is doubly flawed. For one, the proposal is without inherent merit and will harm automobile sales when these are recovering from the pandemic slump. For another, it is not the high court’s job to formulate insurance policy. It is best left to the government and the insurance regulator. There is no reason for courts to infringe on the executive’s right to formulate policies or undermine the regulator’s authority unless a legal principle has been violated.
The law already mandates every vehicle to possess third-party cover at any point of time. The high court ruling, that makes own damage covers compulsory in addition to covering the driver, passengers and owner of the vehicle, and that, too, for five years at one go, will drive up insurance premiums. The purchase price of new vehicles is estimated to rise by 8-10%. This could be a dampener for car sales. Sensibly, in August last year, the insurance regulator withdrew mandatory long-term third-party covers, given that it involved a huge upfront expense for the customer. Strangely, the HC ruling deems the premium paid by a customer on a comprehensive motor policy to be a ‘paltry sum’.
If the concern that a vehicle owner would not renew the insurance cover after expiry is behind the diktat for a five-year cover, it begs the question, what guarantees renewal after five years? General insurers are supposed to upload data of all the insured vehicles on VAHAN, the national vehicle registry website. The robust working of the centralised database will make it easy to track renewals, and also move to data-based tailoring of car insurance policies. Let the government decide.