Economy

Do We Need Motor Vehicle Insurance? Industry Experts Discuss

Insurance & risk management veteran Faruk Vhora, and Mallika Vhora, expert in the field of health & insurance discuss road safety in India and why motor vehicle insurance may be more necessary than you think.

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Road Safety in India

India tops the list in terms of the number of accidents on the road all over the world considering the ratio of the number of people and the incidences taking place. In 2015, there were about five lakh road accidents in India, which killed about 1.5 lakh people and injured about five lakh people. However, this is probably an underestimate, as not all injuries are reported to the police. The actual numbers of injuries requiring hospital visits may be 2,000,000-3,000,000 persons.

With the swift increase in the number of vehicles on the road, the traffic conditions are under a lot of pressure. Since 2000, while road length has increased by 39%, number of motor vehicles have increased by 158%.

Drivers are held responsible for 78% of accidents; 3% accidents are caused by neglect of civic bodies.

Therefore, road safety is one of the most serious public health issues in our country. It has an bearing on everyone, whether one drives a vehicle, walks or rides a cycle.

  1. Some of the major causes of road accidents are as follows – Risk Profile

  • Lack of highway safety
  • Drunken driving
  • Driving in an exhausted/fatigued state for long hours
  • Distracted driving using cell phones
  • Over speeding or rash driving
  • Driving in wrong lanes
  • Turning without giving signal
  • Overtaking from wrong side
  • Flaws in road design
  • Lagged vehicle safety
  • Poor usage of helmets in case of 2 wheelers
  • Poor compliance to seat belt legislation
  • Flaws in placement of road safety signages

Road safety specimens:

  • Flouting lane discipline at major toll gates

motor-vehicle-toll-plazaIssue observed: Large commercial tanker entering toll gate demarcated for LCV/LMV.

Impact: Traffic queues owing to large vehicle blocking lane

Mitigation Strategy:

Toll authorities to ensure passage of vehicles in demarcated lanes at all given times.

Onus on drivers of LCV/LMV/HMVs to follow lane discipline and ensure smooth flow of traffic at Toll gates

 

  • Non-Functional Toll lanes/gates

motor-vehicle-toll-plaza--1Issue Observed: Frequent closure of Toll lanes due to infra/technology/human issues

Impact: Traffic mismanagement, delays in toll collection and wastage of fuel consumed during standby

Mitigation Strategy:

Toll authorities to ensure upkeep and maintenance of toll infrastructure always

Timely checks to be undertaken to ensure lane movement is free of impediments

Planned repair and maintenance activities to be undertaken in a phase wise manner

  • Common Public flouting Helmet regulations

car-insurance-auto-motor-cycle-without-helmet Issue Observed: Bike riders avoiding usage of Helmets in city as well as on highway conditions

Impact: Serious risk of grave injury and even death in case of accidents involving bikers

Mitigation Strategy:

Practicing safe riding by wearing helmets for both rider and pillion rider as well

Enforcing fines for offenders and stricter measures for repeat offenders by means of cancellation of license or revocation for a temporary period

  • Carriage of objects not fit to be carried on certain vehicles on highways

motor-vehicle-truck-heavyIssue observed: Commercial vehicles carrying sharp objects/goods in an unsecured and uncovered manner

Impact: Serious risk of accidents/injuries if any loose object falls off or vehicles crash into such a commercial vehicle

Mitigation Strategy:

Commercial enterprises to ensure goods are carried by adopting safety measures and quality packaging.

Cars/Bikes trailing such dangerous commercial vehicles should maintain adequate distance to ensure no collision. In extreme cases, other vehicles should alert traffic authorities about such irregularities

  • Carriage of hazardous goods on highways along with passenger lanes.

motor-vehicle-hazardous-goods-truck-indiaIssue observed: Commercial vehicles carrying hazardous

Inflammable goods on highways along with other commercial

and passenger carrying vehicles.

Impact: Serious risk of accidents/injuries can happen in case of

collision with another vehicle, explosion, spillage, leakage of

hazardous chemical, oil, gas etc.

Mitigation Strategy:

Standards for commercial vehicles carrying hazardous cargoes to be set with strict implications and permit to be checked at all main check posts.

The timing for transportation of such cargoes should not be allowed during peak passenger carrying hours and in passenger carrying lanes.

  1. Role of Government and Public Sector

  • Develop stricter road safety polices
  • Generate funds for road safety awareness
  • Stricter enforcement of rules by government
  • Building better roads and highways
  1. Role of General Community

  • Acceptance of road safety rules, regulations and policies
  • Participation in road safety awareness drives to enhance people’s knowledge about road safety
  1. Hurdles in Road Safety

  • Negligence by civilians
  • Pathetic condition of roads
  • Unsafe vehicle design for commercial vehicles
  • Violation of road safety standards
  • Lack of emergency services
  • Defects in highway designing
  1. Profile of Road safety issues/accidents

  • Inability to follow lane discipline whilst on highways
  • Large commercial vehicles flouting major laws/ road directives
  • Carriage of dangerous objects in an unsecured manner
  • Poor adoption of Fastags
  • Improper adoption of Toll directives
  • Rash driving on flyovers/subways

Way forward for ensuring Safe Roads and Travel in India

  • Establishment of Centers of excellence in road safety that can continuously work towards road safety by undertaking capacity building, training, research, monitoring
  • Capacity building across various sectors—police, health, and transport– at central and state levels in a planned manner
  • Strengthen trauma care on a priority basis in all district hospitals, medical college hospitals and trauma care centers with required human, financial and technical resources
  • Adopt the principle of safe systems approach for design of all new roads
  • Strengthen road safety information systems to obtain reliable, robust and good quality data to guide all road safety activities
  • Undertake large scale promotion activities and targeted public awareness campaigns to place road safety on high priority and bring behavioral changes among road users
  • Setting up national and state level targets to curb road safety issues
  • Propel shift towards mass public transit systems
  • Separation of Traffic into vulnerable and non-vulnerable ones

The UN Decade of Action for Road Safety recommends member countries and international agencies to implement many activities at international, national and sub-national levels as per the five pillars of road safety which refer to road safety management, safer road infrastructure, safer vehicles, safer road users and post-crash care systems. India must adopt the same and improve its road safety stature to respectable position by the next 5 years.

Why Insurance?

car-insurance-motor-vehicle

One of the ways for accident victims to be compensated for road accidents is through motor vehicle insurance. Motor vehicle insurance has two parts: (i) own damage (OD) and (ii) third party liability (TP).  While OD covers for the vehicle and its physical damage, TP provides for injury or death of others involved in the accident.  Under the Motor Vehicle Act, 1988, third party insurance is compulsory for all motor vehicles.

Between 2009 and 2014, while premium earned through OD segment has increased by 93%, premium earned through TP has increased by 248%. The share of TP within total motor accident premium earned has increased from 38% in 2009 to 52% in 2014.

Incurred claims ratio for motor insurance is high; claims ratio for private companies has been increasing

Data Sources: Ministry of Road Transport and Highways; Ministry of Statistics and Program Implementation; Insurance Regulatory and Development Authority of India; PRS.

Map visualizations have been made using SocialCops.

The incurred claims on motor insurance business ranged between 84% and 103% of the net premium earned between 2006-07 and 2014-15. This ratio for private motor insurance companies has increased from 64% in 2006-07 to 82% in 2014-15.

Currently third party insurance has unlimited liability which means that the insurer has to cover the entire amount of compensation as decided by the courts. Compensation amounts are calculated by courts  on the basis of several factors such as age, and earning capability of the victim, and may go up to several crore rupees.  With unlimited liability, and compensation amounts increasing, claims being paid by insurance companies have been increasing.  Consequently, insurance premiums are being increased regularly.

Author:
Faruk Vhora
Faruk Vhora, a veteran in the field of insurance has led at multiple locations across Gujarat and Maharashtra for Iffco Tokio General Insurance Company Limited. With more than 23 years of rich experience in varied sectors, he has spent exhaustive 19 years in the Banking Securities Finance and Insurance Sector.
His experience and expertise includes Underwriting, Risk Management, Operations, Claim Management, Marketing and Business Development. He has passion to drive across the country and travel the world. With a vision to become the most preferred financial services solution provider to consumers and commercial set ups, Faruk has initiated his entrepreneurial startup Insuratis – Your Insurance Partner.
Co-author:
mallika vhoraMallika Vhora, perusing her Ph.D, is an expert in the field of health, working in the sector for the last 16 years. She has thorough knowledge of health and personal line of insurance. With her domain expertise, she has co-founded Insuratis with Faruk. As the Managing Director, she will be overall in-charge of the health, personal accident, term insurance to start with and expand her horizon in the other lines too at Insuratis – Your Insurance Partner.

This article is sponsored by:

Insuratis – Your Insurance Partner

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• General Insurance covers Retail and Commercial Lines
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