Rs.75,000 Fine for Uninsured Car by Draft MV Act May Invite More Bribery

For all those who ply with vehicles either with an expired motor insurance or no insurance at all, it's going to harsh and painful. The proposed Road Transport and Safety Bill 2014, if passed by the Parliament without changes, proposes hefty fines for vehicles on road without valid insurance.

According to the draft bill, if a person riding a 2-wheeler without a valid insurance policy is caught, he has to pay a hefty penalty of Rs. 10,000. Owners of 3-wheelers and light-motor vehicles have to fork out Rs. 25,000, while for cars and heavy vehicles, the fine amount is as high as Rs. 75,000. This penalty structure is higher by multiple times comparing to existing fine amount of Rs. 1,000, uniform to all motor vehicles, under the Motor Vehicle Act of 1988.

The draft bill, which is now available at the Road Transport Ministry's website seeking public feedback, aims to replace the Motor Vehicle Act of 1988. The bill puts forward stern punishments for traffic and vehicular offenses, in particular, those relating drunken driving, accidents involving children, etc. Of course, penalties does serve their purposes of achieving conformity to road rules and more stringent they are, the more adherent people are. 

While I do advocate that fine amounts need to be heavy, insurance is altogether a different ballgame. Unlike other traffic offenses and vehicular infringements, motor insurance involves more of awareness, accessibility, and affordability. I don't mean that insurance serves no purpose in road safety and transportation related issues. The penetration of motor insurance in India has several rural-urban disparities. Access to insurance services is limited in rural areas due to several reasons like inadequate reach by Insurance companies, affordability, etc. The proposed penalties for insurance violations is more of an corporate move than one actually intended to optimise road safety. Government of India has recently raised the FDI cap in insurance sector upto 49% and with this proposed bill, the government intends to increase insurance penetration automobile users so as to woo new investors. 

A valid Motor Insurance is a must for every automobile on road as per Motor Vehicle Act, 1988.

A study by New India Assurance Ltd, a state-run general insurer, has shown that nearly 70% of scooters and two-wheelers on the road are not insured. About a third of the cars and trucks are uninsured as well. While additional FDI would increase insurance penetration in rural areas or not involves little debate, we see today that such things did not happen in the banking sector (banking in rural) to the aspired level. While insurance companies feel that penalties should go beyond fines and include loss of driving license for repeated violations, ridiculously hefty fines upto Rs. 75,000 have lot of negatives than positives. 

To illustrate my point, I turn to the depressing case of a farmer named Ameer in rural village who uses his TVS 50 moped to commute to nearby market everyday. He doesn't know that insuring any automobile plying on the road is mandatory. Luckly, he is caught by a traffic cop. Now, he has to pay a fine of Rs. 10,000, much higher than the resale value of his TVS 50! So what is he gonna do? Yet, there is one more option remaining. Either it popped up in his mind instantly, or the cop himself helped him out. Ameer tosses Rs. 50 or whatever, straight to the cop's pocket and then disappears. Both disappears. Nothing happens!! Actually a fictitious story, No Ameer, no TVS 50, the bill is yet to be legal!

You just don't protect your vehicle, but also your loved ones and other road users.

I mean, enhanced fine amounts would be a possible breeding ground for bribery. Already, traffic violations are the most loose area of policing where much of corruption happen, and that's where many people face bribery everyday. The proposed fines are so heavy to easily persuade people to indulge in bribery. While I do accept the argument of stricter punishment and fines for other offenses like drunken driving or inappropriate driving license, it is less likely to achieve its theoretical goal of ensuring every automobiles to secure an insurance policy.

But I do acknowledge that IRDA (Insurance Development Authority of India) is trying to strike the cord with some right measures like longer tenure insurance policies for a period of three years, etc. to bring every road users to the insurance fold. Four prime insurance PSUs in India pursue social policies as well to reduce rural-urban disparities in the sector, which is less likely to be pursued by new investors.

Kindly share your views and comments on the issue. 

Photo Credit: www.moneylife.in, www.sikderinsurance.com, www.thehindubusinessline.com