This hot and controversial topic has emerged from a judgment and order dated 4th August 2021 of Hon’ble Madras High court which was to be implemented from 1st of September 2021. It speaks about the Compulsory ‘Bumper to Bumper’ insurance of 5 years for all new Private cars sold from 1st September onwards.

These directions have been issued consequent to an appeal filed by the New India Assurance Company against the order of MACT, Erode, Tamil Nadu in K. Parwathi & Ors. vs. New India & Others; where an award of Rs.14.65 lakh was arbitrarily passed against the New India Assurance Company for the death of a passenger travelling in private Car covered under ‘Act Only’ policy. The liability was disputed by New India on the ground that the Passengers travelling in a private car are not covered under ‘Act only’ Policy. The appeal was allowed but with the aforesaid directions.

“As per the above High Court order, it is mandatory to grant Bumper to Bumper insurance cover from 1st Sept. 2021 onwards, in addition to coverage for driver, passengers and owner of the vehicle, for a period of 5 years.’’

It is pertinent to note that these directions have been issued to the Addl. Chief Secretary, Transport Deptt.,Tamil Nadu, for implementation and to report back the progress on 30th September 2021.

The aforesaid Judgment/order is full of ambiguities as under:

1. The order to ensure implementation of these directions has been issued to the Additional chief Secretary ,Transport Deptt., Chennai who has the authority /jurisdiction over the state of Tamil Nadu only whereas this issue involved is of National level.

2. Similarly, as per doctrine of binding precedents, the order of Madras high is binding on its subordinate courts within the state of TN only.

3. No directions have been issued either to Insurance companies, General Insurance Council or IRDAI.

4. There is no ‘Bumper to Bumper’ policy in the market or in pipeline as of now. It is also not clear as to what exactly the court means by ‘Bumper to Bumper insurance’ every year , in addition to driver, passengers and owner of the vehicle, for a period of 5 years?

5. There is confusion amongst the insurers as to whether it is used for ‘Comprehensive insurance’ or it means Zero depreciation policy or to include all add on covers?

6. The court has also not appreciated the fact that a new product cannot be brought in the market within such a short span of time as it requires the pricing of product through actuarial calculation and approval of the IRDAI.

It is pertinent to mention here that some time back the IRDAI had introduced long-term Motor Insurance cover of 3 years for Private Cars and 5 years for two wheelers but it had to withdraw the same w.e.f. 1st August 2020 due to various constraints in its implementation i.e. Policy holders Complaints of forced selling by financers due to their financial interests, inability to change the insurer of their choice in case of deficiency of service, affordability factor, besides challenges faced by insurers in Actuarial pricing, distribution of package policies, accounting of premium , adjustment of NCB in case of claims etc .

So far as the merit of the aforesaid judgment /order is concerned, the court cannot compel an individual to insure his property. Whereas, the court, vide this order, is making the optional cover of Comprehensive insurance as mandatory. Therefore, it tantamount to judicial amendment of the Motor Vehicles Act which is beyond the power of High Court since such powers are vested with the Supreme Court only. Accordingly, the order is not tenable in law and can be set aside if any aggrieved party goes in appeal.

The General Insurance Council and IRDA are reportedly seized with the matter and consulting the legal Eagles for taking further appropriate steps, keeping in view the aftereffects of these directions.

Pros and cons of Implementation of the Order—

1. It will help increase insurance penetration as the number of insured vehicles shall certainly increase.

Consequently, there will be substantial increase in premium kitty

3. This step might decelerate the sale as the cost of vehicles shall be increased by 8 to 10 %. As per rough estimate, the new comprehensive motor package, directed to be offered at dealerships, could be at least three times the premium of the current third-party prices.

4. It will be tough for the insurers to judge the impact on loss ratio during the five-year lock-in period.


1. The best way will be to make necessary amendment in the definition of the ‘Third Party’ to include everyone except the driver and owner.

2. Alternatively, a compulsorily cover could be provided for the occupants of a car under the Act only/Third Party policy for 5 years instead of a compulsory bumper-to-bumper (Comprehensive) policy for 5 years.

3. The premium can be realized based on monthly usage of the vehicle or in flexi monthly installments to mitigate the effect of payment of hefty amount in one go.

There will be a significant revision in pricing as claim events are bound to go up.

The General Insurance Council on 1St September 2021 has approached the High Court. seeking clarification on the phrase ‘Bumper to Bumper’ since it is not a standard industry definition. The clarification has also been sought on the Class of Vehicles intended to be covered for 5 years and whether the court was referring to a Motor Package Cover including the Third party and Own Damage both ?

It was also urged upon the court that there were several other interested parties in the order like the IRDAI whose views also needs to be taken in the matter.

After hearing the counsel, Hon’ble High Court was pleased to stay the operation of its aforesaid order and fixed the matter for further hearing on 13/9/2021.

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