Insurers To Seek Relief From Supreme Court On Making PUC Must For Motor Covers

Indian general insurers plan to file a review petition in the Supreme Court seeking a relief from its order that asked them to deny motor covers for vehicles without a valid Pollution Under Control certificate.

“We are in consultation with our lawyers and will soon be approaching the Supreme Court,” R Chandrasekaran, secretary general at the General Insurance Council told BloombergQuint over the phone. The directive will only increase the number of uninsured vehicles, he said.

Nearly half of the 19 crore vehicles registered in India were uninsured as of 2016-17, according to Chandrasekaran. And while the insurance regulator has asked them to follow the Supreme Court's July 6 directive, it's in contradiction with Motor Vehicles Act and insurance regulatory norms. That's because they bar any insurance company from denying third-party cover.

If implemented in its present form, this apex court order will hurt motor insurance penetration, Bhargav Dasgupta, managing director and chief executive officer at ICICI Lombard General Insurance, said during the company's earnings call on Tuesday. It doesn't serve the objective of the Supreme Court, which is to increase PUC compliance rather than reducing the insurance penetration, he said.

Based on suggestions of a Supreme Court-appointed Environment Pollution Control Authority, a top court bench headed by Justice Madan B Lokur on Aug. 10 made it mandatory for all insurers to verify the PUC from the regional transport office before renewing the annual motor insurance. The objective is to keep polluting vehicles off the road.

“For insurers, it will have a negative impact on their growth as the number of insured vehicles would go down,” said Chandrasekaran. A centralised PUC database should be created to verify vehicles before giving them insurance, he said.

Joydeep Roy, insurance leader at PwC India, said it will be better to enforce PUC at the time of issuance of fitness certificate for cars or it can be verified at fuel stations at the time of refilling. The main reason for making third-party insurance mandatory was to ensure that in a poorly penetrated insurance market like India, no road accident victim died without the insurance benefit, he said. Denying a policy renewal for not having a valid PUC opens up the possibility of vehicles plying on the road without any insurance, he said