Straight from the Specialists
(Any opinions expressed here are those of the author and not of Thomson Reuters)
Let us briefly look at the major risks associated with having a vehicle on the roads:
The first risk is the damage to your own vehicle in case of an accident. But unlike cars, where you would run to the paint shop even if there is a small scratch, owners of two-wheelers tend to go to a service centre only if the vehicle is not functional. A paint job requirement or even a minor dent on the bumper is usually ignored.
The second is the risk of causing damage to others. This is a major risk and is covered under the third-party component of an insurance policy. This is mandatory by law as it puts others at risk. But since one generally never makes a claim for one’s own damage, the insurance policy itself is completely ignored.
It is compulsory for every vehicle in India to have a third party insurance, which covers risks involving damage or loss to others caused by the vehicle you drive.
Since it is mandatory, the pricing has traditionally been administered by the insurance regulator, IRDA. With the price controlled and risk unlimited, the portfolio is bound to look messy.
(Any opinions expressed here are those of the author and not of Reuters)
A motor insurance policy consists broadly of two parts — third-party cover, which is regulated; and an ‘own damage’ cover, the premium for which is left to market dynamics.
The premium for ‘own damage’ cover, which forms the larger chunk of the insurance premium, is based on risk and competitive pressures.
(The views expressed in this column are the author’s own and do not represent those of Reuters)
Motor insurance is the only insurance product in India mandated by law. This means that any one owning a vehicle is bound under the Motor Vehicles Act, 1988 to have a third-party motor insurance policy.