Almost a third of cars and more than two-thirds of two-wheelers on Indian roads do not have even the mandatory third-party liability insurance, according to an analysis by insurance companies. Worse, many companies have found fake motor insurance policies in circulation.
Insurance companies have drawn these estimates going by the number of vehicles registered and the total number of policies issued.
The analysis, which was not possible in the past, has been facilitated with the help of technology.
"Uninsured vehicles is a problem in motor insurance. Nearly 70% two-wheelers and 30-35% of four wheelers are uninsured. It is clearly a challenge to society as victims of accidents caused by these vehicles do not get adequate compensation," said G Srinivasan, chairman, New India Assurance, the largest non-life insurer and also the largest issuer of motor policies.
Insurers say that one reason why such a large number of vehicles remain uninsured is the proliferation of fake policies.
Several non-life companies have come across fake policies issued in their name. With advancement in printing technology, it is possible for fraudsters to replicate policies of existing companies, helping them get through police checks. However, it is at the time of accident and claims from third parties that insurers detect the existence of fake policies.
Second, vehicle owners in small cities and villages do not face any scrutiny of their documents.
According to Srinivasan, uninsured vehicles is one of the structural issues faced by the non-life industry in writing motor-third party insurance, which is a drag on the balance sheet of non-life companies.
The other issues were rigid prices and the tendency of court awards to go up in keeping with inflation.
Some insurers say that it is possible that the number of uninsured vehicles on road could be lower than New India's estimates because many vehicles do not ply after 15 years. "In our estimates, around 20-25% of cars are uninsured and in two-wheelers the uninsured vehicles are likely to be around 50%. In two-wheelers, the renewals of first year policies are as low as 25%. Although, we do send renewal notices, lower premium on two-wheelers make it difficult to do a personalized follow-up," said Madhukar Sinha, National Head - Personal Lines, Tata AIG General Insurance.
One solution that insurers have come up with is long-term policies.
"Issuing long-term policies is a challenge because it is difficult to predict the movement of income and inflation over a long period. In some markets in Europe and USA, insurers issue only six month policies. However, there are discussions on long-term insurance policies for some segments of vehicles, which may be filed with the regulator for approval shortly," said Sinha.
"In many cases, third-party proposals come to us after a break in insurance. In such cases, the underwriting process needs to be a bit more stringent which is difficult to implement online," Sinha added.
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