General insurance companies have expressed reservations against the directive of the Ministry of Road Transport and Highways to provide third party insurance cover only to vehicles which possess valid pollution under control (PUC) certificates.
In a directive to the Managing Directors of general insurance companies on May 30, the Ministry had said: “It must be ensured that no third-party insurance policy is issued or renewed without ascertaining the availability of a valid PUC. In the case of transport vehicles, the availability of a valid fitness certification is also mandatory.”
However, insurance companies said it’s not practical to execute the Ministry’s latest directive. “It may not be possible to implement this directive. We are planning to meet the officials of the Insurance Regulatory and Development Authority (IRDA) to explain the difficulties involved in implementing the PUC certificate order,” said a senior official of a leading general insurance company.
The Ministry directed insurers that “directions may please be complied without any exception”. “A compliance report to this Ministry may be submitted latest by June 15, 2018,” it said.
“Please refer to the order dated August 10, 2017 passed by the Supreme Court in Writ Petition (C) No. 13029 of 1985 in MC Mehta vs Union of India and others, wherein the Court has directed that the insurance companies will not insure a vehicle unless it has a valid PUC certificate on the date of renewal of the insurance policy. It may further be noted that the fitness certification is also a mandatory requirement for all validly registered transport vehicles,” the Ministry of Road Transport said in its letter to insurance companies.
The SC bench headed by Justice Madan B Lokur had asked the Ministry of Road Transport and Highways to ensure that all fuel refilling centres in the National Capital Region (NCR) have PUC centres. The bench was hearing a PIL filed by environmentalist M C Mehta way back in 1985 dealing with various aspects of pollution.
The Supreme Court had accepted the recommendations of the Environment Pollution (Prevention and Control) Authority (EPCA) to ensure mandatory linking of PUC certificate with the issue of annual vehicle insurance. The court also asked the authorities to issue specifications for the kind of equipment required to be installed at PUC centres so that regulatory violations can be curbed. Though it was expected that Insurance Regulatory and Development Authority (IRDA) may issue some instruction to the general insurers for complying with the SC order, the regulator refrained from taking the step and took a stand that the matter is between SC and insurers and there was need for its intervention. “As insurers it would be difficult for us to ensure the use of PUC by any customer. We don’t have the means to enforce it,” said an insurance official.
While own damage business is a profitable portfolio for insurance companies, third-party motor insurance — which is compulsory for all vehicles to ply on Indian roads — is a loss-making proposition. IRDAI administers the third party insurance pricing and reviews the rates annually based on a pre-determined formula. The regulator takes into account various factors including the loss ratios for insurers, inflation and higher awards by judiciary. In all other classes of P&C business where detariffing has taken place and pricing freedom given to insurance companies, the premiums have come down, thanks to competition. Though externally, insurance companies are supporting detariffing of motor TP premium, there is a perception that behind this facade they are working for retention of the tariff where they get assured increases in premium rates by Irda instead of facing the prospects for drastic reduction in premium in a competitive detariffed environment.