Third Party Insurance is Pre-Requisite to Motoring on Indian Roads

The Claimant is also entitled to seek additional compensation on fault basis and this compensation is available without any limits based on the earning capacity and age of the victim or dependants. Motor Insurance is the branch of insurance that most directly affects the general public. The vehicle population in the country has already crossed 55 million marks and 2.5 million vehicles are added every year. From the infrastructure point of view, there were 300000 vehicles on road-network of 400000 km in 1951. This number has gone up nearly by 170 times by 2000 whereas the road-network in the country has expanded only by 9-times causing serious traffic congestion, pollution and the increasing number of road accidents in the country. The road accident rate is almost 35-per thousand, which is highest in the world, though it has only 1% of the total number of vehicles. 220 persons are killed on roads every day, and about 80,000 a year. It is like having two planes crashes every day. Over 3,20,500 are injured. The number of accidents per thousand vehicles in India is 120 as against 10 in developed countries. While the average accidental death per 1000-vehicles was 2 only in the west, in India these were 55. This cold-blooded statistics assumes greater importance as it has a direct bearing on the general public. The victims of the road accident need beneficiary legislation to support their rights so that their families get some support to meet the adversities of life. To ensure compensation to all unfortunate victims third party motor insurance is pre-requisite to motoring on Indian roads. As per Motor Vehicle Act no person shall use, except as a passenger, or cause or allow any other person to use, a motor vehicle in a public place unless there is in force about the use of the vehicle by that person or that other person, as the case may be, a policy of insurance complying with the requirements of the Motor Vehicle Act. This policy is generally known as Third Party Insurance The insurers sold this cover as Liability Only Policy. As the insurance cover protects the insured from all sums which the insured shall become legally liable to pay the victims or their legal heirs (third parties) in event of an accident caused by or arising out of the use of the insured vehicle the cover is known as third party cover. The insurers also sell the Comprehensive cover that covers a complete package along with the liability cover. This package insurance is costlier than the third party cover as it covers fire, self-ignition, lightning, burglary, house-breaking, theft, riot and strike, external accidents, malicious and terrorist acts, flood, typhoon, hurricane, storm, tempest, inundation, cyclone, hailstorm, frost, landslide, earthquake, rockslide and transit risk by rail, road, inland waterways, air or lift. Generally, this cover is known as Own-Damage or First Party Cover and the insurers sell this product as Standard Package Policy. The policy also covers certain add-on covers including compulsory personal accident cover for the owner-driver. As the motoring on roads has its hazards it is compulsory by the law to have at least the liability cover to drive on Indian roads and if the owners of the vehicle need the cover for the damage to the vehicle too they must opt for a comprehensive package cover. Driving a vehicle not only attracts a penalty against the violation of the Indian Motor Vehicle Act but it may also attract a huge financial burden if any accident takes place injuring a third party. India is a Common Law Country. Anyone who has suffered injuries or damaged through the negligence of the vehicle owner or driver can be brought before the law of courts for an action to recover damages and sufferings sustained. Victims of road accidents are compensated in different parts of the world as per the legal framework of those nations. In India section 147 of the M V Act specifies that liability of insurers to third parties sustaining bodily-injury or death arising out of the use of the insured motor vehicle is unlimited. The liability system is a mixed system of Add-On-No-Fault. No-fault scheme provides compensation Rs.50,000 & Rs.25,000 respectively for death or permanent disablement respectively. The victim or the legal heirs are entitled to get the compensation without providing the negligence of the driver. The Claimant is also entitled to seek additional compensation on fault basis and this compensation is available without any limits based on the earning capacity and age of the victim or dependants. To avoid these burdens, the owners must always ensure that they have a valid insurance policy and it is effective and in force whilst their vehicles ply on the roads. The victims in India are also ignorant of the beneficiary law that supports them and in absence of adequate knowledge the claims are not lodged against the insurers in the first instance and they prefer to go to the court directly. There is no bar, however, to compromise dispute out-of-court and nowadays the insurers consider the out of court settlement immediately through various conciliatory forums. Practicing on a contingency-fee system by advocates and showing the attraction of large compensation, however, encourages litigation. The major portion of the award in such a situation goes in the kit of advocates as contingency fees. This has encouraged nefarious practices like touting. This system defeats the purpose of the award since the amount left in the hand of the victims becomes sometimes inadequate to serve the needs for which the compensation was assessed and awarded. The general public that does not know direct settlement is forced to take the services of the advocates to get the compensation. The need of the hour is that there should be more and more public messages to literate the public at large about their rights so that the money reaches in the hands of those who need that and at that time when they need it most.

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By Mr.Vinay Verma, Published in The Insurance Times, November 2004