No insurance policy to comply with Madras High Court Order on 5 Year Bumper to Bumper Coverage

Suspense remains as to whether vehicle buyers will have to shell out a huge sum for insurance premiums upfront for five years from Wednesday to comply with the Madras High Court order.

As it stands, buyers of new cars in Tamil Nadu from Wednesday have to pay huge premiums for five years.

We learn that the industry lobbying body, the General Insurance Council, is exploring various options, including legal options, to get out of the situation.

But where is the policy? “IRDAI (Indian Insurance Regulatory and Development Authority) must first approve such a product. There is no five year insurance policy for bumper to bumper vehicles,” Saharsh Damani, CEO of the Federation of Automobile Dealers Associations (FADA) told IANS.

Non-insurance industry officials told IANS that none of the insurers had a five-year bumper-to-bumper insurance policy for cars and two-wheelers.

Such a product should be designed after performing actuarial calculations. Industry officials from sector regulator IRDAI and insurers remain silent on the issue while claiming to serve the interests of the insurer public.

Recently, the Madras High Court, by order, made expensive bumper-to-bumper insurance coverage mandatory for all new passenger cars sold from September 1, 2021.

The court also ordered the dissemination of the judgment by the Additional Chief Secretary, Department of Transportation, Chennai, to all insurers and said agents must ensure that the above directive is strictly followed in letter and spirit without no deviation.

“Why should insurers issue instructions. They will be happy if the order is implemented as they will receive a lump sum premium income up front,” an unwilling insurance intermediary told IANS. .

The Headless IRDAI has not issued any public opinion / guidance in this regard.

The government of Tamil Nadu is also silent on this aspect because the court had ordered the dissemination of its order to the additional secretary of the transport department.

“We have not received any circular from the head office in this regard,” an official at a general public sector insurer told IANS, preferring anonymity.

The court released the case on September 30 for reporting compliance. “The insurers are silent because the court has not ordered them. It is up to IRDAI to give the necessary instructions making compulsory individual accident insurance cover for the occupants of a private car and the passengers of two-wheeled vehicles. It is now optional, ”he added. V. Narayanan, president of ICM Insurance Brokers Pvt Ltd, told IANS.

Narayanan said bumper-to-bumper insurance coverage will cost more than full insurance coverage because claims under the former will be settled on the basis of replacement cost while under the latter, depreciation will be applied to the cost of components.

Vehicle insurance policies are divided into two parts: own damage (vehicle insurance against damage, theft) and civil liability (third party liability).

Third party insurance coverage is compulsory while insurance coverage for vehicle damage is not obligatory.

The Madras High Court order makes vehicle insurance coverage compulsory.

“This is a patently untenable order (court order) and would not withstand legal scrutiny if vehicle manufacturers or any other aggrieved party appeal,” court attorney D. Varadarajan told IANS. Supreme Specialist in Company / Competition / Insurance Laws. .

Commenting on the lack of awareness on the part of car owners as to the responsibility of the occupants of the car, the court when hearing an ordered case: “Therefore, this court orders that each time a new vehicle is sold after 01.09.2021, it is mandatory for bumper-to-bumper insurance coverage each year, in addition to covering the driver, passengers and vehicle owner, for a period of five years.

“Subsequently, the owner of the vehicle must be careful in safeguarding the interests of the driver, passengers, third parties and himself, in order to avoid unnecessary liability being imposed on the owner of the vehicle, beyond of five years, from the date there is no provision to extend the policy from bumper to bumper, due to its unavailability, ”the court ordered.


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Justin D. O'Neill

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