The finance ministry is planning to move an ordinance in parliament for a separate motor vehicle insurance and compensation bill.
At present, the motor vehicle’s (amendment) bill, 2012, prescribes the conditions for insurance in case of death or injury to a third person in a road accident.
The Rajya Sabha has already cleared the motor vehicle’s (amendment) bill administered by the Roads ministry. It is expected to be taken up by the Lok Sabha in next parliament session.
The finance ministry has sought law ministry’s opinion on whether it could introduce an ordinance for a separate legislation soon after the motor vehicle (amendment) bill is passed by parliament.
As long as the motor vehicle’s legislation is there in parliament government cannot introduce their own bill. Once it is cleared by Lok Sabha, government will bring in an ordinance for a separate legislation and when parliament convenes next, government will table the bill.
Third party motor insurance protects the vehicle owner from any financial liability in case of death or injury to a third person.
Insurance companies, which are bound by law to settle the claims with no cap on liability, paid out 45% more than the premium on account of claims under the third party motor pool last year.
The new law is expected to propose a cap on third party motor insurance claims.
Moreover, insurers are not even allowed to hike premiums on such policies. Insurers are asking to de-tariff the premiums. Except Scandinavian countries no other country has it.
The annual liability on account of third party motor insurance is Rs 10,000 crores with average third party claim per accidental death and injury coming to Rs 3 lakh and Rs 1 lakh, respectively.
Public sector General Insurers are hit harder as private insurers avoid writing such policies due to high claim ratios, particularly in the commercial vehicle space.
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