Motor Vehicle Insurance (India)

Motor Vehicle Insurance in India protects the motor vehicle owner against (a) the loss of or damage to the vehicle due to an insured risk, loss of use, theft, etc., and (b) indemnification if the vehicle owner is liable to any third party by law. Third-party insurance is a legal requirement. The vehicle's owner is legally responsible for any injury, danger, or damage to life or property of a third party caused or arising from the use of the vehicle in a public place. Driving without insurance in a public place is a punishable offence under the Motor Vehicles Act of 1988.
The provisions of the following legal framework govern motor vehicle insurance in India. Important among these are:
The Motor Vehicles Act of 1988 mandates that every motor vehicle plying on the road is insured. Also, a copy/proof of the same should be kept in the vehicle. The Union Ministry of Road Transport and Highways said amendments have been brought in under Section 139 of the Central Motor Vehicle Act, 1989, so digital documents like driving licences and registration certificates are considered valid and at par with the original hard copy.
Generally, there are two types of motor vehicle insurance policies.
One who buys the Act liability motor insurance should remember that the policy only covers statutory third-party liability and does not cover risks, including damage to the owner's vehicle. Therefore, purchasing a package insurance policy that provides comprehensive coverage, including coverage for your vehicle, would be prudent.
A motor vehicle in a public place is potentially a dangerous and lethal instrument. Even when it is without its engine or petrol if it is moved down on an incline, even unintentionally, it can cause considerable damage and human injury; hence, unlike other properties which may be insured or not at the option of the owner, a motor vehicle is required by law to be insured in respect of the user's liability for death, bodily injury or damage to property of third party. These insurance contracts are based on indemnity and only cover the damage; the whole insurance amount is not given every time.
As sometimes the driver of the vehicle is often a person of small means and the injured person goes without adequate compensation, insurance of motor vehicle covering the third party risk is made compulsory in India, and the Motor Vehicles Act provides that vehicle should not be used in a public place without having insurance policy covering third party risks. Third-party risk means risk covered for bodily injury, death and damage of the property of third party. A third party is anyone except the owner or passenger in the private vehicle. So pillion riders of the motor cycle, passengers in private cars, jeeps, etc., are not third parties. However, passengers in public vehicle such as bus, contract carriage vehicle, taxi etc. are also third party and hence covered by third party or statutory policy.
The Act policy does not cover the occupants of private vehicles and pillion riders. However, they can be covered by paying additional premium. If an additional premium is not paid to cover the risk of occupants of private vehicles and pillion riders, the insurance company will not be liable to compensate such victims. However, Supreme court held that if the policy is a package/comprehensive, then the occupants of private vehicles and pillion riders are covered, even if such person's additional coverage premium is not paid.
A comprehensive motor insurance policy provides coverage for losses, including damage to the insured vehicles due to the following perils:
According to the general exclusions clause in the motor insurance policies, a claim may be denied in the following circumstances.
The driver not having a valid licence is one of the general exclusions; it is useful to know some of the legalities related to driving licenses.
The Motor Vehicles Act classifies vehicles into various types. Even driving licences are issued keeping in mind the nature and types of vehicles. Some of these are as follows:
It should also be remembered that the motor vehicle laws covering such a wide range of vehicles are carefully considered while determining the settlement of claims by the motor insurance companies.
Generally, a vehicle insurance policy is valid for one year. However, long-term third-party vehicle insurance has been made mandatory for two-wheelers and four-wheelers as per the Supreme Court order. While the long-term insurance policy is 3 years for four-wheelers, it is 5 years for two-wheelers. The following guidelines are issued to implement the Supreme Court guidelines via a circular issued to insurers under Section 14(2) of the Insurance Regulatory and Development Agency of India Act, 1999, effective September 1, 2018.
Further, about the comprehensive insurance policies, the circular states:-
Currently, a comprehensive insurance policy, an insurance package, covers risks, including damage to the owner's vehicle and liability (third-party insurance). After the introduction of long-term third-party motor insurance for new cars and new two-wheelers, the insured may be given the following two options:
It is necessary to renew the insurance policy by paying the insurance premium annually before the due date.
Insurance companies generally do not provide any grace period on the due date to pay insurance premiums. No insurer shall accept any risk in any insurance business in India until the premium due has been received or advanced in the manner prescribed under section 64VB of the Insurance Act, 1938.
If the insurance policy lapses without payment of the insurance premium within the due date, vehicle inspection is mandatory. Also, allowing a comprehensive insurance policy to lapse beyond 90 days may result in loss of accrued no-claim bonus benefits.
A Grievance is any communication expressing dissatisfaction with an action or inaction about the quality of service/deficiency in service of an insurance company and/or any intermediary or seeks remedial action. Every insurer must ensure a grievance redressal mechanism to provide excellent customer service, an important tool for business growth.
Under the Public Grievance Redressal Rules, the Governing Body of the Insurance Council (GBIC) established the Insurance Ombudsman in India on November 11, 1998. Following this, India's Insurance Regulatory and Development Authority enacted certain regulations. Accordingly, every insurer shall ensure that the following measures are taken:
There are Insurance Ombudsmen at various locations. Any person having a grievance against an Insurer, either himself or through his legal heirs, nominee or assignee, may make a written complaint to the Insurance Ombudsman.
Complaints should be made to the Insurance Ombudsman within whose territorial jurisdiction the insurer's office is located at the address in the insurance policy or the insurer's communication. The Insurance Ombudsman can be approached in the following situations.
The Insurance Ombudsman will act as Mediator. And he:
If redress through referral is not effective, the Insurance Ombudsman will pass an award restraining the insurance company within 3 months of receiving all the requirements from the complainant. The insurer concerned shall comply with the judgment within 30 days of receipt and report the same to the Insurance Ombudsman. There is no appellate authority against the decision of the Insurance Ombudsman. The judgment is final and binding on the insurer.