By law, third party insurance coverage is mandatory for all vehicles, which means that in the event of an accident, the compensation is given out of the premiums that are collected. This ensures two things; one, that the injured party receives just compensation for the accident in a timely manner and two, that the driver or owner does not face any financial challenges in paying the compensation as the vehicle insurance takes care of it.
However, there have been cases where insurance companies have had to pay large amounts of compensation without anything extra taken out of the drivers or owners. This has led to the question of whether third-party compensation should be paid directly by them.
This is a topic that is hotly debated by insurance experts, legal professionals, and consumer activists. Let’s look at both sides of the debate.
Why third-party insurance is sufficient
Lower income strata: The major reason this is advocated is in the case of commercial drivers, such as truck drivers or cab drivers, who may be earning a substantially lower income than others in the social hierarchy. When affixing the responsibility onto owners, it should be taken into consideration that not all owners would be affluent enough to pay additional compensation, that is over and above the existing mandatory third-party insurance.
Change in owner/residence: There are instances where, by the time the accident case has been closed and compensation decided, the vehicle has changed hands or the owner has migrated, changed residence, or even passed away. In such a case, it would be difficult to pin the compensation down on the owner.
No-fault principle: Under the current laws, the no-fault principle is followed, which means that in the event of permanent disability or death, the victim receives interim compensation immediately. If vehicle owners or drivers are instead made to pay compensation directly, then it would involve a lengthy legal process that will delay the compensation that the victim requires.
Absconding drivers or owners: There are cases where the drivers or owners abscond after an accident which makes it even more difficult to get compensation. In such cases, getting compensation straight out of the third-party insurance coverage is ideal for victims to get what they deserve in a timely manner.
Why drivers and owners should pay direct compensation:
One of the major reasons the demand for owners or drivers to pay compensation directly and separately is that it will make them more responsible in future. With the number of road accidents in India being one of the highest in the world, it is important to get accountability from drivers and owners as well.
Since third party insurance has been made compulsory, it is guaranteed that a victim of an accident will receive compensation. They will not be at the mercy of the owner or the law to get what they deserve. For this reason alone, it may be better to continue with the third-party insurance coverage as has been made mandatory in India now. However, owners or drivers could be mandated to buy an add-on cover that will cover compensations that exceed Rs.15 lakh so that there is less of a burden on insurance companies as well.