India is estimated to have more than 180 million registered vehicles. As per the official data 55 per cent of these vehicles do not have any type of insurance policy which means whopping 100 million vehicles ply on Indian road uninsured. Around 60 per cent - 65 per cent of the two wheelers and 30-35 per cent of cars in India are not insured.
Largest reason behind such a large chunk of vehicles plying uninsured is the lack of awareness about vehicle insurance and poor enforcement by government agencies. Owing to the large population of vehicles on Indian roads, checking of documents happens rarely especially in rural areas. Some insurance companies claim that a large number of fake policies in circulation are also contributing towards it.
This is causing a business loss of millions of rupees to the insurance companies and GDP loss to the nation. But a more serious concern is the decline of compensation to accident victims of such vehicles. If the vehicle is insured, third party claims are settled by the insurance company but in case of non insured vehicles the liability lies with the vehicle owner. In most of the cases, the owner would not be in a capacity to pay any compensation to the victim.
According to NCRB (National Crime Records Bureau) report two wheeler accidents claim 94 lives daily and truck/lorry claim 66 lives daily. If maximum of the vehicles are uninsured, it is a matter of grave concern that what would happen to the family of the victims. Rate of deaths per 1000 vehicles in India is as high as 1.4.
If we look at the developed countries, the percentage of uninsured vehicles is very less. UK hasthe lowest percentage of around 4 per cent followed by Italy, Greece and USA at 8%, 10 per cent and 12 per cent respectively. Obviously, they have not come to this level in a single day. A lot of effort has gone behind it. For example UK has a policy of Continuous Insurance Enforcement (CIE) where offenders having uninsured vehicles are sent notices and are fined. Strong police enforcement also contributed a significant role to reach such levels.
What Should India do?India has to go a long way as more than 50 per cent vehicles on Indian roads are uninsured. We need to work in all possible ways so as to arrest this perennial problem.
Awareness - Most of the Indian population is still not covered by life insurance, so expecting them to have vehicle insurance seems to be a distant dream. We need to educate people about the importance of insurance and benefits out of it. Also, training the traffic policemen on the aspects of vehicle insurance is equally important.
Enforcement- Although third party insurance is mandatory in India but this rule needs proper enforcement. There is an urgent need to integrate the data of registered vehicle in India (Through the RTO's) and Insurance data available by IRDA. By this way, we would get the list of defaulting vehicle owners. We may then send the letters to the defaulters and send challans to them as well.
Product Development - Some new products can be designed for greater insurance penetration. Few companies have already launched their long term insurance policies ( 3 Years) for two wheelers but the same is not very popular. We can have a similar product for cars/commercial vehicles as well. Another option is to develop some product like PAY AS YOU DRIVE as available in some countries like US, Japan and Australia. This product enables the users to pay the premium on the basis of how much he drives, how he drives, when he drives and where he drives.
Innovation - India is a very great country with so many inventions to its name. We can work out for any innovation solution which is suitable for Indian terrain. One such solution which comes to my mind is to make Aadhar number mandatory at the time of vehicle registration. Using the Aadhar information we can do multiple things such as stopping the LPG subsidy to the defaulting vehicle owners or even deducting the third party premium directly from the linked bank account.
There is no doubt that if the insurance penetration increases in India, there would a drastic decline in the third party premiums.
Let's hope that government of India will soon take some necessary steps in this direction.
Guest Author
Amit Puri is working as AVP with Tata Motors Finance Limited, a 100% subsidiary of Tata Motors Limited. With more than 12 years of work experience, he takes care of Insurance business in his current role. He had also handled Auto and commercial vehicle Finance with TMF and ICICI Bank Ltd.