Perhaps the proverbial last straw. A whopping Rs 19 lakh as compensation to the victims of Salman Khan’s reckless driving awarded by the High court has become a hot topic for discussion among insurance company officials. So what if it is fortunately not the insurance company that has to fork out the amount. The day is not too far when such an instance happens fear insurers when not every motorist is as financially sound as Salman Khan and the onus of paying off the compensation could fall on the insurance company.
In this case a division bench of the Mumbai High court has ordered Salman Khan to pay Rs 10 lakh as compensation to the relatives of the deceased and Rs 3 lakh each to the injured victims. Insurers fear that such high compensation ordered by the court may set a precedent of sorts and encourage motor accident victims to demand high compensation amounts bleeding insurance companies further.
The motor insurance sector has already been reeling under heavy losses with third party claims going even over 200 percent and compensation amounts are in many cases twice or thrice the premiums paid. A cap on third party covers is the need of the hour. But efforts made in this direction meet with stiff resistance from especially the powerful truck owners lobby and insurance companies continue to bear huge losses on third party covers.
The experience of private insurers who took the plunge recently is no different. Consequently, a number of private insurers have become more selective while writing third party covers and quite a few have stopped writing such covers altogether. Of late, to bring down claims private insurers have added more deductibles in policy documents and are known to keep a close tab on costs. Vehicles used as private taxis are not issued risk covers and insurers tie up with auto workshops to limit losses.
Insurers are pressing on the finance ministry to put a cap on motor accident awards which if comes through will hopefully turnaround the fortunes of the sector.
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