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Tuesday, September 14, 2021

Mandatory bumper-to-bumper insurance order stands withdrawn by Hon'ble Court


Motor Insurance – often one would get call (telecallers) seeking placement of renewal – offering high discounts and at times additional covers and one term oft used is ‘bumper-to-bumper’.  Suddenly this became a key-word – everyone related to industry started talking about it – especially the Court. 

As we travel on roads, we see hundreds of motor vehicles of various hues – and sadly there are accidents too .. .. .. Motor vehicle accidents are one of the major causes of death and injuries in India. By some statistics citing Ministry of Road & Transport, around 1.5 lakh people die every year in five lakh road accidents in the country.  Motor Vehicles Act 1988 covenants various aspects of automobiles on road. .. .. 

Arising out of  a landmark judgment by Hon’ble Justice S Vaidyanathan in a recent case before Madras High Court in an appeal filed by an Insurer, there were to be some wholesome changes. The cause of action related to an accident that occurred on 3.8.2016 near Hogenekal .  In the Appeal filed by Insurer,  Honble Justice S Vaidyanathan gave a  directive that “ all vehicles sold after September 1, should have bumper-to-bumper insurance cover for five years mandatorily” that whenever a new vehicle is sold after September 1, 2021,  it is mandatory for coverage of bumper to bumper insurance every year, in addition to covering the driver, passengers and owner of the vehicle, for a period of five years.   

That mandatory ‘Bumper-to-Bumper’ Insurance under the order of the Hon’ble Madras High Court should have been implemented from Sept 1, 2021; however, a  Civil Miscellaneous Appeal filed on behalf of General Insurance Council (GIC) was listed before the Court.  The petition drew reference to the Court order of 4.8.2021 mandating coverage of bumper to bumper policy (which actually is Package policy for automobile vehicles) as also the Circular issued by Transport Commissioner.  The counsel recorded that Insurance Companies are prepared to comply with the orders of  the Court and recorded that Insurers   act as Distributors of the products, that are approved by IRDAI and without obtaining product approvals, actuarial pricing of products, etc., from IRDAI, they cannot launch any new product or add-on cover.  It was pleaded that Insurers be granted 90 days' time to effect changes in the computer system after due approval from IRDAI. Till then, the order passed by this Court may be kept in abeyance.  

This Civil Miscellaneous Appeal was listed this day under the caption “For Clarification” at the instance of  learned counsel for General Insurance Council (GIC).  Mr.MB Raghavan, learned counsel appeared for Insurance Regulatory & Development Authority (IRDA) and Mr. N Vijayaraghavan, learned counsel, for Mr.N.P.Vijayakumar, representing Society of Indian Automobile Manufacturers, (though SIAM is not a party to this Writ Petition). Upon hearing the submissions made on behalf Insurance Regulatory and Development Authority (IRDAI), General Insurance Council (GIC) representing the licensed General Insurance Companies and SIAM, as a non profit entity that has been espousing the cause of Automobile industry for several years,  the Court held that it would appear that the order dated 04.08.2021, mandating the coverage of bumper to bumper policy may not be logistically and economically feasible for effective implementation in the present legal dispensation. It was submitted that the directions issued by this Court in Paragraph Nos.12 and 13 of the orders dated 04.08.2021, have unintended impact, causing severe repercussions on the society and therefore, the directions issued by this Court may be withdrawn in the interest of Policyholders, Automobile Industry and public at large. 

He also brought to the notice of this court that the issue of long term third party insurance coverage has been mandated by the Apex Court as early as in September, 2018, and the Regulating Body, viz., Insurance Regulatory and Development Authority (IRDAI) has been periodically monitoring over the changing scenario from time to time and hence, there is no need for issuance of such compulsory directions.  

The counsels for various parties  in one voice stated that the views expressed by this Court on 04.08.2021 in respect of protective coverage to uninsured innocent victims, such as gratuitous occupants in a private car and pillion riders, will be duly taken care in consultation with IRDAI to safeguard the interest of innocent victims, which is the anxiety of the Court. The counsel for IRDA Mr MB Raghavan   submitted that IRDAI will consider better and fuller insurance coverage to all unfortunate victims, be it Drivers, Owners or gratuitous occupants or pillion riders, as the case may be and prayed for suitable modification / withdrawal of the directions issued by this Court on 04.08.2021.  

Considering the overall submissions made by the Parties, the Court felt that the earlier order issued by this Court on 04.08.2021 in Paragraphs No.13 may not be conducive and suitable for implementation in the current situation. Therefore, the  Honble Judge said direction in Paragraph No.13 is hereby withdrawn for the present. The Court recorded its hope and trust that law makers will look into this aspect and examine the need for suitable amendment in the Act, relating to wide coverage of vehicles so as to protect the innocent victims.  

In view of withdrawal of the direction regarding bumper to bumper policy, the Circular dated 31.08.2021 issued by the Joint Transport Commissioner, Chennai also stands cancelled. 

Now mandatory ‘bumper-to-bumper’ issue stands logically concluded – that is learning for all – more so, for the Insurers

With regards – S. Sampathkumar

14th Sept. 2021.

1 comment:

  1. A welcome change. For the directives to take shape, the MV Act needs to be amended as well, as you pointed out. I recollect in the days prior to the last MV Act amend, gratious passengers, even relatives could claim under the earlier Act, and MACT courts have awarded earlier in such cases.
    If this is to be included, then it would be an extra financial liability on the insurance companies, which the acturial deptt of insurance comppanies/ IRDAI will of course examine and roll out possible changes in the applicable TP Premia.