Vehicles To Cost More Post Madras High Court's Verdict On 5-Year Motor Insurance: Report

The Madras High Court on Friday passed an order to make a 5-year 'bumper-to-bumper' motor insurance mandatory for all vehicles sold from September 1, 2021, in the state. Justice S Vaidyanathan passed the order to ensure that all passengers are covered under the insurance, including the driver. As per dealers and car marketers, this decision will increase the cost of vehicle acquisition by 8 to 9 per cent compared to its current price. The price of a mass-market two-wheeler will increase by Rs. 7,000 to Rs. 8,000, while insurance for a mass segment car (price range of Rs. 4-5 lakhs) will increase by Rs. 50,000.

Five-year insurance will be mandatory for all vehicles from September onwards

Vinkesh Gulati, President, FADA said, "To avoid unnecessary liability being foisted on the owner of the vehicle, the Madras High Court has ordered for a five-year bumper-to-bumper insurance to be mandatory. Whereas IRDA has restricted the Insurance Company to give an Own damage policy for more than a year wef 1st August 2020. Such an order at the time of pandemic where the demand is still fragile and the financials of entry-level vehicle buyers are in distress will be lethal. This would have a negative impact on the customer's confidence & buying sentiments since the policy will entail significant price hikes to vehicle ownership. Adding this new expense to them will be an additional burden to them. For instance: The price of a mass-market two-wheeler will increase by Rs. 7,000 - 8,000, while insurance for a mass segment car (price range of Rs. 4-5 lakhs) will increase by Rs. 50,000.”

He further said, “Knowing India is a price-sensitive market, the new policy is likely to increase the price significantly across segments. In these economically adverse times when the economy is trying to recover from the Covid crises, owning a vehicle has become a necessity. We would recommend the court should reconsider the recommendation on the policy as an optional policy rather than presenting it to be mandatory, or only mandating passenger insurance only.”

Prices of the vehicles are expected to go up by 8 to 9 per cent 

Ravi Bhatia, Jato Dynamics President, "The challenge which they have post to buyers says that the cost of insurance will have to bourn ultimately by consumer. Currently, the policy says you need to buy one-year insurance and two-year third-party insurance, so that's the minimum requirement. With this policy the cost of full comprehensive insurance will be significant, overall its cost will go up by 8 to 9 per cent. This may be untenable, first of all, there is IRDA which defines the insurance laws in the country. This judgement puts lots of burden on the dealer and also increases the cost of the consumer."

The verdict was issued while setting aside the award by the Motor Accident Claims Tribunal (MACT) wherein a sum of Rs 14.65 lakh was directed to be paid by the insurance firm to the claimants, who were relatives of the deceased, as compensation for his death in an accident.

Source