Introduction

Insurance is a contract by which the insurer agrees to make good the losses suffered by the insured. The insured is to pay the premium, and when an indemnity arises as per the indemnity clause, the insurer will cover such loss for the insured. Insurance can be life insurance, medical insurance or vehicle insurance. Under the Motor Vehicles Act, there are three kinds of insurance: liability cover (third party liability), stand-alone own damage cover (for the vehicle) and comprehensive cover (third party and vehicle).

Due to the multiplicity of policies and different premium plans of each, the customers often opt for a single kind of insurance, which does not cover their losses in certain cases, and this leads to a huge number of cases pending in the Motor Vehicle Accident Claim Tribunal. The Supreme Court, in the case of National Insurance Company Limited Versus Smt. Thungala Dhana Laxmi And Ors.SLP(C) No. 8563 of 202, taking into consideration the large number of cases pending and the suffering undergone by the insured, has suggested the IRDAI to bring in a common Vehicle insurance framework, which shall be helpful to the public.

Background

The dispute in the above-mentioned case began with a fatal motor accident in 1996. The claimant is the wife of the deceased, who died in an accident while travelling in his own insured car. The insurance company did not grant the claimant the insurance which was paid by the deceased. The insurer contended that the comprehensive private car package policy did not cover the owner himself, as he was not a third party. The policy could be redeemed only against a third party. In 2009, the Motor Vehicle Accident Claim Tribunal ruled in favour of the insurer and dismissed the petition. The Telangana High Court, in 2024, reversed this order, stating that the comprehensive policy should cover all inmates of the car and the claimant is to get compensation.

Key Points

Need for standardization: The Supreme Court, while looking into the matter, asked for the submission of various policy profiles from various insurers and observed that there was significant diversity in the definition and coverage offered under similar policies, such as comprehensive or package plans. The lack of standardization, along with low consumer awareness, creates disputes. The Court also observed that cases that come to the MACT are to be closed within 8 to 10 years. However, due to the complexity of insurance policies and their inability to help the insured cover their losses, the cases continue to drag on. The Court instructed the IRDAI, the Insurance Companies and the GI council that there is a necessity for a standardised policy which can be created by a collaboration among them. The court also specified that it is not a policymaker and therefore can only give advice to come up with a new and uniform policy, along with consumer awareness. By making uniform policies the three different policies would be considered the same and would help the insured make good his losses.

The well-being of the insured: The Supreme Court based its decision on the difficulties undergone by the insured. They pay the premium to protect themselves from future indemnities, but very often get nothing and are forced to deal with their losses on their own due to the insurance companies asserting that such a particular indemnity was not covered by the insurance policy, and the advice of the Supreme Court on uniform insurance policy seeks to prevent such a situation.

Conclusion

The Supreme Court’s instruction would motivate the IRDAI to develop new regulations or guidelines that mandate standard policy wording for basic coverage. It would bring in clarity in adjudication and reduce the long years of litigation carried out regarding the same, and it would empower the consumers to get compensated for their losses.

 

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WRITTEN BY I Sharan