Stringent punishment proposed under the new Motor Vehicles Act might have made car owners frown but insurance companies are laughing all the way to the bank. There has been an uptake in sale of motor insurance thanks to the new regulations.
The new Motor Vehicles Act came into effect on September 1. It has enhanced penalties for various driving errors.
According to the new law, if a vehicle is on the road without insurance, then a fine of Rs 2,000 and imprisonment of up to three months can be imposed for the first offence. For subsequent offences, a fine of Rs 4,000 and imprisonment up to three months can be imposed.
This has resulted in people renewing their lapsed policies. Digital insurance companies are the ones who are benefiting the most from this.
The process of renewal of a lapsed policy is quicker and completely digital. Hence, the customers can renew their policies in no time so that they do not have to bear the brunt of the heavy fines. Renewal of motor insurance policies in the two-wheeler segment is really low, as compared to four-wheeler.
“With the new regulations, people are now voluntarily coming in and renewing their policies. We have seen a rise of 300 per cent in issuance of two-wheeler insurance policies in the past few days since the new regulations kicked in,” said Jasleen Kohli, chief distribution officer, Digit Insurance.
Insurance companies expect the new regulations to bridge the gap between insured and un-insured vehicles significantly.
Sajja Praveen Chowdary, business head, motor insurance, PolicyBazaar.com, said, “Since the implementation of the amended Motor Vehicle Act, our online motor insurance sales has grown by more than 500 per cent in five days.
“We are now selling about 67,000 insurance policies per day on our platform.
“The share of policies being sold to consumers with lapsed plans has grown by nearly 50 per cent, as they look for protection against new penalties.”
Subramanyam Brahmajosyula, head, underwriting and reinsurance, SBI General Insurance, said, “With the steep increase in fines imposed for driving vehicles without insurance, we expect to see an increase in motor insurance sales in the coming days and weeks for cover for vehicles whose insurance has lapsed.”
Experts believe that this trend will sustain and it is not just a momentary spike because the new regulations have only been implemented in a few states. When it is implemented in more states, the business will only grow.
“More and more people will start to renew their policies and get their vehicles insured,” added Kohli.
This will certainly help the motor insurance segment a lot as growth in the segment was at its lowest in the June quarter owing to the slowdown in the auto sector. The Insurance Regulatory and Development Authority of India (Irdai) is contemplating linking insurance premiums to traffic violations committed.
They have formed a working committee to recommend the framework and methodology to link insurance premiums with traffic violations.
“It is perceived that linking insurance premium to traffic violations committed could reduce road accidents and change driver behavior,” said Irdai.