General insurance stocks are rallying in trade on Wednesday, August 5, after the Supreme Court directed a major change in the duration of mandatory third-party motor insurance for new vehicles, increasing the cover period to four years for new cars and six years for new two-wheelers on August 4.
The direction was issued by a bench comprising Justice Sanjay Karol and Justice Augustine George Masih, which said the longer insurance period was necessary to improve compliance and road safety.
Shares of insurance companies jumped in trade, with Go Digit General Insurance rising as much as 10.48% to Rs 290.90 apiece, New India Assurance jumping as much as 9.16% to Rs 187.50, and ICICI Lombard General Insurance rising as much as 7.67% to Rs 1,771.
At present, third-party insurance for new cars is mandatory for three years, while new two-wheelers require five-year coverage. The Supreme Court had prescribed these periods in 2018.
The Insurance Regulatory and Development Authority of India (IRDAI) and General Insurance Council had opposed extending the insurance period. However, the Court said the move was in the interest of road safety.
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