The Indian Motor Vehicles Act (MVA) was introduced in 1914, amended in 1920, and passed by the Imperial Legislative Council. It was amended several times subsequently before the Central Government of India made the Central Motor Vehicles Rules, 1989 to regulate all aspects of vehicles on the road. The Act offers guidelines on licensing vehicles and drivers, management of traffic, insurances, liabilities, penalties, etc. One of the major reforms brought by the MVA was the mandatory requirement of a driver’s license, registration certificate, and third-party liability insurance for all vehicles.
The Act allows authorities to levy a fine or penalty for several offences including:
- Driving without a license
- Allowing someone to drive your vehicle without a valid license
- Driving without a registration certificate
- Driving without a valid third-party insurance coverage
- A minor driving a vehicle
- Over-speeding or rash driving, etc.
The MVA was amended subsequently for better implementation of the regulations. From September 1, 2019, penalty amounts for various offences have been increased, and imprisonment has also been added for severe ones. While the Act has been trying to ensure safer roads, it has benefitted the insurance sector too.Let us look at the benefits offered by the MVA to insurance companies.
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Increase in sales
Since the MVA mandates all vehicles plying on public roads or even parked in public places to have third-party liability vehicle insurance, every vehicle purchase is accompanied with an insurance policy. Traditionally, the sale of vehicle insurance was limited to those vehicle owners who understood its benefits. However, with the MVA making it mandatory, insurance companies have experienced a huge increase in sales.Also, in the latest amendment of the MVA, the penalty for driving a vehicle without insurance has been increased from ₹1000 to ₹2000 and/or three months prison/community service for the first offence and ₹4000 for subsequent offences. Hence, there is a massive surge in the number of vehicle owners opting for an insurance plan to meet the mandatory requirement and get financial protection in the event of a mishap/accident.
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Increase in Renewals
Most insurance policies lapse after one year.Therefore, policyholders have to renew their policies every year.With strict rules and heavy penalties, many vehicle owners are proactively coming forward to renew their policies. Hence, insurance companies are registering more active policies, and customers have started realizing the benefits of a vehicle insurance policy.
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Consumer Awareness
Motor insurance can offer a lot of benefits to vehicle owners. It offers financial protection to vehicle owners against damages and/or injury caused during an accident. There are broadly two types of car insurance policies:
- Third-party liability cover only
- Comprehensive policy
While a third-party liability cover is mandatory, it does not offer any reimbursement for damage to the policyholder’s vehicle. A comprehensive policy, on the other hand, offers protection against damages to the vehicles of the policyholder and third-party along with any physical injury or death of anyone involved in the accident. It also provides cover against damages to the policyholder’s vehicle from natural or man-made calamities like earthquakes, floods, landslides, thefts, riots, acts of terrorism, etc.
Further, most insurers like Tata AIG offer people the option to buy car insurance online.Hence, researching and comparing policies is a breeze. This has helped insurance companies increase awareness about the benefits of having the right insurance policy for your vehicle.
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Promotion of safe driving habits
A motor insurance policy comes at an annual premium. While the insurance company tries to assess the risk profile of the owner-driver and the vehicle and charges a premium accordingly, it also offers benefits to policyholders for not filing a claim within a policy period. Popularly known as the No Claim Bonus, most insurers offer a discount on the premium if a policyholder does not file a single claim in a policy period. This is a cumulative bonus that grows with time. So, if a policyholder does not file a claim for 3-5 years, he can expect a substantial discount on the premium. Hence, it helps promote safe driving habits among vehicle owners. This helps the insurance company create an image of a company that cares about its clients.Also, with stricter driving rules and higher penalties, the Motor Vehicles Act endeavours to make Indian roads safer for motorists.
Summing Up
The Motor Vehicles Act has been designed to make Indian roads safer by creating regulations to reduce the number of offences and road accidents. If a vehicle causes damage to a third-party, then the owner is legally liable to compensate for the damages and death caused. Hence, the MVA has made it compulsory for all vehicles to have a minimum cover for these damages. This has led to a surge in demand for vehicle insurance benefitting the insurance sector in the bargain.
