The 2018 financial year will see some changes in the accident claim available for motor insurance. To reduce losses in this segment, the Motor Vehicles (Amendment) Bill, is all set to fix the maximum amount that can be claimed in case of an accident at ₹10 lakhs.
Motor insurance is the biggest business provider under general insurance, as it is mandatory to purchase a third party cover while buying a vehicle. The unlimited liability that exists for the third party cover (as per the Motor Vehicles Act 1988) has been causing an annual increase of 20-25% in claim payouts by general insurance companies.
This adds severely to their losses, as family members of victims, dissatisfied with the received claim amount, can approach the Motor Appellate Claims Tribunal for a better compensation. Most cases are settled in favour of the policy holder, adding to the insurance company’s losses. As a result, the combined ratios in third party motor insurance reached almost 170% (meaning for every ₹100 collected as premium, ₹170 was paid as claim).
Therefore, the Motor Vehicles (Amendment) Bill, stating that “the maximum liability for compensation to a victim by the insurer linked to the minimum regulated premium shall be a sum of ₹10 lakhs”, was put to and passed by the Lok Sabha.
Once this bill is passed by the Rajya Sabha as well, the maximum amount that will be paid by the insurance company to a victim will be only ₹10 lakhs. Any further charges will have to be borne by the vehicle owner involved in the accident. If a person has the need for an unlimited liability, they will have the option to choose such a cover, though the premium for those will be higher.
As the head of motor insurance at a large private insurance company put it, “When both rail and air accident victims (and kin) have a fixed payout, why not road accidents? If there is a need felt by an individual for unlimited liability, they can take those covers once it is available.”
Source: Money Control
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