Scrappage policy may lower car insurance premium

Older vehicles are not only more hazardous but also carry a greater risk of breakdowns and accidents. They also lead to more pollution.

The scrappage policy aims at taking old vehicles off the roads. Vehicles beyond an age are compulsorily to be scrapped under the statute. Such policies currently exist in some states in differing forms. The national-level policy that is now being envisaged contemplates a 15-year life span for vehicles.

R.K.T. Krishnan, Country Head – Motor Claims, Royal Sundaram General Insurance, stated that the Government of India has been considering a policy to scrap vehicles that have reached their end of life (typically 15 years for a commercial vehicle and 20 years for a private vehicle) since 2016 and the policy draft for scrapping facilities was notified on 15 March.

The impact of vehicle scrappage on insurance will be known as the implementation of the policy evolves into action. Insurers will prefer safer vehicles to insure and this will have an impact on third-party claims. Any third-party premium reduction on this score will have to be seen, as a third-party premium is fixed after considering the industry experience.