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While this third party insurance provides for unlimited liability coverage in case of death, calculations for payout for permanent and partial disability are very formulaic and often, seriously inadequate
In a recent verdict, the Supreme Court noted that while determining the compensation that should be awarded to a motor accident’s victim, his/her physical injury should be seen in the light of their profession.
This has irked many general insurers, who believe that this will lead to higher amounts being paid as reparations. This adds to their financial woes, already worsened by no cuts in the basic premium figures for third-party motor insurance this year.
In the case of Mohan Soni vs. Ram Avtar Tomar and others (2012), the judges noted that while a leg amputation could mean the end of any gainful employment for a rickshaw puller, the same might not be true for an individual who perhaps has a desk-intensive job. Hence, taking into view their profession while judging the compensation awarded to them was extremely crucial.
How is this compensation calculated?
While it is mandatory under Indian law for all motor vehicles to have a third-party insurance, there is no set structure in place to compute compensation. Presently, the minimum compensation specified for any kind of permanent disability is set at Rs 5,00,000.
As per IRDAI data, motor insurers received third-party gross direct premium (GDP) worth Rs 43,258.92 crores in FY 2022-23, rising marginally from Rs 41,737.22 in FY 2021-22. In fact, insurers have witnessed a 10-15% uptick in the motor claims ratio (third party + own damage).
While this third party insurance provides for unlimited liability coverage in case of death, calculations for payout for permanent and partial disability are very formulaic and often, seriously inadequate.
Compensation in case of permanent disability is generally arrived at by multiplying Rs 5 lakh with the percentage disability as per schedule I of the Employee’s Compensation Act, 1923.
But, as is evident, for someone working as an audio engineer, absolute deafness can be catastrophic, employment-wise, for which Rs 5,00,000 won’t suffice. This, even when these compensation amounts will inch up 5% annually, to provide for inflation and burgeoning cost of living.
Despite this, it barley begins to cover the injured individual and his family. Data from NCRB suggests that in 2021, around 4,03,116 cases of road accidents were reported, which left 3,71,884 persons permanently or temporarily injured and 1,55,622 dead. Most of them, about 59.7% were a result of over speeding, which left 2,28,274 people injured.