Insurance companies object to govt's order on pollution certificate

Single owner-driven trucks, which dominate the sector, have a very weak compliance level with insurance or pollution control measures
General insurance companies have objected to the government diktat that vehicles having third-party insurance must have the pollution under control certificate.

On Friday, companies, through their umbrella body, conveyed to the central government that the plan could not be implemented in 15 days.

Their swift response, coming within 48 hours of the government missive, demonstrates the huge stakes involved in the business since it will adversely affect the transport sector. 

In a pre-election year, this puts the Centre in a difficult position as it has to put into effect an unpopular decision pushed by the Supreme Court. It compounds the pressure on the Centre because the Insurance Regulatory and Development Authority, in a separate development, is also planning to raise the rates for third-party insurance soon. The transport lobby has contested this.

On Wednesday, the Union ministry of road transport and highways sent instructions to all the 30 non-life insurance companies of the country to make the pollution under control certificate mandatory for a motor vehicle to get basic third-party insurance cover.

The order has ramifications because it applies to all transport vehicles. Single owner-driven trucks, which dominate the sector, have a very weak compliance level with insurance or pollution control measures. A third-party cover means if a vehicle meets with an accident in which it injures or kills someone outside the vehicle or destroys property, the insurance company will make good the damage.

But the insurance companies, while supportive of the measure as the means to cut vehicular pollution, have figuratively thrown in their hands, saying they are unable to meet the stiff deadline. The road ministry had in its letter to the companies instructed them that “a compliance report to this ministry may be submitted latest by June 15.”

The companies, through the letter from the General Insurance Council, have demurred. “Many CEOs have pointed out that mandating production of a valid PUC certificate by the insured at the time of renewal is difficult to be implemented immediately within the next 15 days”.

They said motor insurance was written by several agencies, ranging from agents at RTO offices to automobile dealers to web aggregators. Bringing them all on board would take time, the letter says.  The chief executive officers have said these agents are not trained to identify the genuineness of the anti-pollution certificates and hence there should be an online verification facility set up across the country. 

This is likely to raise costs for the sector all round, though the companies have not held this out as a threat. Meanwhile, “in view of the various distribution points ... making necessary changes to incorporate this mandate would require working system changes...” but the companies have offered no timeframe as to when it could be done.

P Umesh, insurance consultant, said the government order was welcome but acknowledged that it could not be pushed through in a hurry. 

The court order follows from a case filed by environment activist M C Mehta in 1985. The verdict made it mandatory for the government to link pollution control measures to vehicles. It was felt that if insurance cover became conditional on the certificate, it would be a salutary measure.

But insurance companies say this could compel transporters to run vehicles without insurance cover. India has the world’s highest rate of road accidents and this could aggravate the problem.