Straight from the Specialists
(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 third-party cover, which is compulsory, covers the risk for third parties in situations like damage caused to a person who was standing by the road and was injured or killed by an accident involving an insured vehicle, or damage caused to a wall after a vehicle crashed into it. The claim amount in this case can be unlimited and it is a sticky subject.
The Insurance Regulatory and Development Authority (IRDA) decides the premium that can be charged for different types of motor vehicles using elements like cubic capacity, types of activities being undertaken and tonnage as primary segregating tools.
(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.