Refuse fuel to uninsured vehicles, suggest insurers

The insurance industry has proposed that uninsured vehicles should not be allowed to refuel at oil pumps, looking to raise penetration of automobile insurance, industry executives familiar with the development said.

The proposal was part of the presentation made during 'Bima Manthan', organised by insurance regulator, the Insurance Regulatory and Development Authority of India, or IRDAI, earlier this month.

Insurers have proposed an app that will be integrated with M-Parivahan and show whether the vehicle is insured or not.


"The idea is to collaborate with oil companies and have such camera scans at fuel pumps, which will instantly display the insurance status of the vehicle," said an industry executive aware of the development.

Under the existing regulations, third-party motor insurance is mandatory.

As per industry estimates, 54% of the vehicles are uninsured. Mostly commercial vehicles, which include tractors and three-wheelers, do not opt for insurance renewal. A similar trend is observed in the case of two-wheelers.

Industry believes that denying fuel to uninsured vehicles would also aid government revenues.

"This will also help the government, as our estimates indicate that 54% of uninsured vehicles amount to premia of ₹40,000 crore, which leads to an annual goods and services tax loss of over ₹7,000 crore," the executive, quoted above said, adding that the proposal may be taken up with concerned ministries and other stakeholders.

Another executive said that if the proposal is accepted by the government, a system may be devised to offer uninsured cover on the spot.

"We have also recommended that no uninsured vehicle should be given a FASTag as it will limit their movement," he said, adding that the industry council is also in discussion with the ministry of road transport and highways to leverage the FASTAG and VAHAN ecosystems and identify uninsured vehicles.

"Such vehicles can be penalised, and we can build in provisions to purchase insurance via 'Bima-Sugam' architecture," he added. IRDAI is working on Bima Sugam, an online insurance marketplace, which will provide a one-stop platform for multiple services including sale of policy, renewal and settlement of claims.

According to industry estimates, the current size of the motor segment is over ₹80,000 crore. In the last few years, the industry's loss ratios have consistently remained upwards of 80% except during FY21, when they touched 75.6%, mostly on account of Covid restrictions and low usage of vehicles.

Earlier this month, IRDAI held its third Bima Manthan as a part of its aim to achieve universal insurance by 2047. It sought recommendations from the industry to further improve insurance penetration across all sectors.