Page 34 - Insurance Times April 2021

legislative changes. Driving an uninsured vehicle will now may reduce the burden of interest & conclude the
lead to a fine of Rs. 2000 for first offence which may increase uncertainty of appeal and from victims perspective. This
to Rs. 4000 in case of repeat offence. may provide timely compensation and help to family in
need of such support.
The changes brought in specifically by this Amendment, and
that will determine the liability of insurers. Corresponding 2. Linking of TP Liability with TP Premium
premium and related process are major concern for the (Section 147):
general insurers which is the focus of this paper. Those who The fundamental principle of insurance lies in adequacy
deal with TP claims or provide technical reserves should of price consistently over a period of time for risk
remain fully aware of these relevant changes which are insurers to accept such legal liabilities. Insurers must be
discussed hereunder: allowed to charge a premium sufficient to fund the
1. Direct Settlement of TP Claim by the ultimate cost of claims, necessary administrative
Insurance Company (Section 149): expenses and margin to compensate for the cost of
A new section has been introduced in Chapter XI obtaining the capital necessary to fund the solvency
empowering Insurance Companies for direct settlement margin. The pricing of 'own-damage' risk of a motor
of claims out of court. This may result in diminishing the vehicle was de-tariffed in India in 2007 but the 'third
burden of Tribunals and may provide faster settlements party liability' premium is still regulated by the
to victims of road accident and their legal heir who now Insurance Regulator.
have an option to approach insurers directly for pursuing The provision of unlimited liability in case of injury/death
their claim. The procedure prescribed for such and Rs. 6,000 in case of third party property damage
settlement, in the Amendment Act, is as under: (TPPD) has now been amended in the Act and the
a. Upon receiving the information of the accident, concept of third party liability from being unlimited has
either from the claimant or through Accident been made to be linked with third party premium. The
Information Report (AIR) or otherwise, the Amendment empowers & authorize the Central
Insurance Company (IC) shall designate an officer Government to prescribe a base premium and the
to settle the claims related to such reported liability of an insurer for the purposes of TP insurance
accident. related to either death of a person or grievous hurt in
b. The officer designated by IC for processing the consultation with the IRDAI. Till now the IRDAI was
settlement of claim of compensation may make an notifying the statutory third party premium on
offer to the claimant for settlement before the prescribed formula. Now this will require approval of
Motor Accident Claims Tribunal (MACT) giving such the Central Government.
details, within 30 days and after following such A policy of insurance issued before the commencement
procedure as prescribed by the Central of the MV (Amendment) Act, 2019 shall be continued
Government. on the existing terms under the contract and the
c. If, the claimant to whom the offer is made under provisions of this Act shall apply as if this Act had not
sub-section (2) been amended by the said Act.
i. Accepts such offer-
1. The Claim Tribunal shall make a record of 3. New Statutory Defences (Section 150):
such settlement and such claim shall be The statutory defences available to insurers in Section
deemed to be settled by consent; and 149(2) of MV Act before this Amendment are now
protected under Section 150(2). Ground of defence has
2. The payment shall be made by the IC been widened. In addition to the earlier mentioned
within a maximum period of 30 days from defences following defences are now also available
the date of receipt of such record of following with respect to breach of a specified condition
settlement.
of policy:
ii. Rejects such offer- a. Driving under the influence of alcohol or drugs as
1. A date of hearing shall be fixed by the laid down in Section 185. This will provide statutory
Claim Tribunal to adjudicate such claim on defence to insurers against drunken driving and
merits. may facilitate their defence in contesting such
From insurers perspective outside court, settlements cases in the Tribunal or Court.

34 The Insurance Times, April 2021