Motor Vehicle Bill to make it mandatory for government vehicles to buy insurance


In a move that will result in bumper business for insurance companies, the New Motor Vehicle Bill, passed by the Cabinet on Wednesday, proposes to make it mandatory for government owned vehicles to buy third party insurance, said sources.

This could prove to be a game changer of sorts for state governments. There are very few states like Gujarat and Maharashtra , which have a dedicated insurance fund covering road accidents caused by government buses.

Others like Tamil Nadu, despite having more than 20,000 government buses plying on its roads and an average of 750-800 accidents a year, do not have any form of insurance. “It is too early to say how the Bill will be implemented. It could be modelled along the lines of the Pradhan Mantri Suraksha Bima Yogana Scheme or along the lines of what the IRCTC is now trying to come up for trains,” said an official with SBI General Insurance Co.
“It will most likely be the public-sector companies who will insure states like Tamil Nadu — as on the face of it, it is bound to be a loss making proposition with very high claims. Nearly 4,000 buses running in TN are condemned and need to be scrapped. And not a week goes by without an accident. It is likely that the initiative might be scrapped like the earlier railways insurance cover, when claims get high,” says an official with United India Insurance Co.
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So, who gets the kickback from insurance companies for this?

“The Motor Insurance Act clearly states that all vehicles plying on the road must have insurance. There is no differentiator between private and government vehicles. But state governments have been lax in this regard, and if the Bill states so it will augur well for the industry,” said an IRDA official.

The IRCTC plans to offer insurance of up to 10 lakh for railway customers, after the Union Budget Announcement in this regard. Before 2009, Indian Railways had experimented with buying cover for passenger liability, but the policy was discontinued after insurers hiked the premium to 78 crore following a rise in claims. The old cover was a statutory 5 lakh insurance for all passengers.

The Times of India

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