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Insurance Article

New Motor Bill and its Impact on the Insurance Sector

September 21 2016
New Motor Bill

Studying the impact of recent changes in the Motor Vehicle Act

The Motor Vehicle Amendment Bill, 2016, aims at reducing the number of road accidents, and consequent injuries and deaths. The increasingly congested Indian roads and a blasé attitude towards traffic rules, which are said to be the cause behind the increase in road accidents, will be addressed sternly with hefty fines.

According to National Crime Records Bureau (NCRB), 51 road accidents occurred every hour during 2014, wherein 16 persons were killed. During 2014, a total of 4,50,898 cases of ‘Road Accidents’ were reported, which rendered 4,77,731 persons injured and 1,41,526 dead. Deaths due to ‘Road Accidents’ in the country have increased by 2.9% during 2014 (1,41,526) over 2013 (1,37,423).

The new bill has made provisions to simplify third party insurance claims and settlement process. A harsher penalty for offences by juveniles, higher compensation for hit-and-run cases, and smoother registration process are some of its highlights.

A few key points of the bill are listed below:

  • The compensation for hit and run cases will be increased from ₹25,000 to ₹2 lakh.
  • The maximum claim in case of death from a road accident will be at ₹10 lakh (₹5 lakh for grievous injury) from insurance companies. Currently, an insurer’s liability is unlimited in case of third party insurance policies for injury or death.
  • The fine for driving without licence goes up ten times to ₹5,000 while penalty for drunken driving increases fivefold to ₹10,000.
  • For driving without third party liability cover, the proposed penalty is ₹2,000, up from ₹1,000.
  • For offences by juveniles, the guardian or owner of the vehicle shall be deemed to be guilty. They will have to pay a penalty of ₹25,000 in addition to three-year imprisonment.
  • The penalty for driving without seatbelt is up ten-fold to ₹1000.

Insurance Cover: The Need of the Hour

In addition to providing third party legal liability cover, a car insurance offers various benefits like cashless network garages and road side assistance (RSA) with hassle-free online issuance as well as renewals.

With the rules and penalties becoming stricter, getting yourself the mandatory insurance cover is of utmost importance. While the new motor bill is a step towards making roads safer, it is always prudent to get your vehicle insured for enhanced protection.

The Effect on the Insurance Industry

Though the new provisions are meant for a safer tomorrow, it is upon individuals to adhere to these with sincerity. The bill simplifies the provisions for making and settling vehicle accident insurance claims, and imposes stricter penalties for driving without insurance. The cap on third party claim has been a favourable change for the insurance companies.

If followed diligently, the new rules will go a long way towards reducing the occurrence of road accidents and maintain safer roads. With decreased number of road accidents, the number of insurance claims will consequently drop which will be beneficial for both the insurer as well as the insured.

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