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Insurance pricing delay hits taxi sales
The Economic Times, November 29, 2018


NEW DELHI: Taxi sales could grind to a halt across India — further slamming the brakes on a decelerating automobile industry — as the Insurance Regulatory Development Authority of India (IRDAI) is yet to fix a uniform price point for selling three-year, third-party insurance covers for vehicles used as cabs.

Several industry executives ET spoke to confirmed that taxi-cab sales have come to a halt in Delhi, Maharashtra, and Madhya Pradesh in the past two weeks. Regional Transport Offices (RTOs) are refusing registrations after a roads ministry circular, dated November 12, mandated a three year, third-party insurance cover for both non-transport and transport vehicles.

Sales and registrations of taxis could stop across the country in the next few days, as the price point of the required insurance product for the segment is yet to be approved by the regulator, industry executives said. App-based cab aggregators and fleet operators purchase about 240,000 vehicles annually. IRDAI officials could not be reached for comment.

Taxis were, so far, being registered on purchasing a one-year, third-party insurance cover. In an order dated November 12, 2018, the Ministry of Road, Transport & Highways said: “…It has come to notice that some states are not entertaining third-party insurance in respect of new transport category vehicles for the period of three years. It is reiterated in this connection that as per… Supreme Court’s order, it is mandatory to get third-party insurance for a period of three years, whether it is used for transport or nontransport purpose.”

Third-party insurance premiums for vehicles used for commercial purposes are higher than those for private cars as they are more prone to accidents.

“IRDAI had notified price points for three-year, third-party insurance covers only for personal cars. Now, with the roads ministry clarifying that the court order is applicable to the taxi segment as well, RTOs have stopped registering vehicles used for commercial purposes as the relevant insurance product is not available in the market,” a senior executive with a leading carmaker said, on the condition of anonymity.

In an order dated July 20, 2018, the SC held that consumers would have to mandatorily pay upfront three and five years’ third-party insurance premiums on purchasing new cars and two-wheelers, respectively, starting September 1, 2018.

Earlier, owners had to buy one year third-party insurance cover, which they could renew annually. The order raising upfront insurance costs, with interest rates, hit passenger vehicle sales, which declined in the three months to September 2018, before rising 1.6% in October.

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