SC mandates third party insurance for new vehicles sold from September 1

In a bid to provide relief to victims involved in vehicular accidents, the Supreme Court of India on July 20, 2018 passed a judgment making third party insurance compulsory for every new four-wheeler and two-wheeler sold in the country starting September 2018.

The top court said that a meeting was held by the Supreme Court Committee on Road Safety on March 26, 2018, where it recorded that there were about 18 crore vehicles plying on the road and only about 6 crore vehicles had the mandatory third party cover. In other words, 66 percent vehicles were running on the road without any third party insurance cover and the victims of accidents including those who have died and their legal representatives were not getting compensation because the vehicles were not insured.

To get over this problem being faced, particularly by persons who are legal representatives of victims of fatal road accidents, the Committee had detailed discussions with the Insurance Regulatory and Development Authority (IRDA), General Insurance Council, Ministry of Road Transport and Highways and Department of Financial Services, Ministry of Finance and the government of India.

After detailed discussion the top court said that it has made it clear that the third party insurance cover for new cars should mandatorily be for a period of three years and five years for two-wheelers. This may be taken and treated as a separate product. We leave it to the insurance companies to deal with comprehensive insurance policies on a separate footing and it would be at the option of the owner of the vehicle to decide which policy should be taken except that the third party insurance is mandatory.

Commenting on the new order, K G Krishnamoorthy Rao , managing director and CEO, Future Generali India Insurance Company said, “The recent order of Supreme Court that every new car sold should have a three year third party liability insurance cover and every new two wheeler sold should have a five year third party liability insurance cover is a welcome verdict.  As of now a significant percentage of cars and two wheelers are not insured for the mandatory third party insurance because of which many times the common man who meets with a road accident involving such vehicles do not get adequate compensation. The challenge for the insurance industry to implement the order from September 1, is the readiness of the product and pricing to be approved by the regulator and time required for making changes in the IT systems of the companies.”