Commercial Vehicle owners push for extension of policy, but insurers disagree

Mumbai: Differences have arisen between owners of commercial bus and car fleets and insurers on whether insurance policies should be extended, given that a majority of the vehicles were parked for over two months due to the lockdown.

Vehicle owners want to invoke the Indian Motor Tariff Endorsement 11, which asks insurers to either extend the policy or reduce the premium in the subsequent renewal if a vehicle is “laid up” in a garage for an extended period. However, the insured are required to inform the insurer in advance about such a lay-up.

Several insurers have sent emails to vehicle owners, informing them that since the application for the endorsement was not made before the vehicles were laid up, they cannot extend their policies. ET has seen some of the emails.

Vehicle owners argue that since the total duration of the lockdown was not foreseeable, they shouldn’t be expected to give prior intimation in this case.

“How would we know that our vehicles were going to be laid up for more than 60 days beforehand? The first lockdown was announced for only 21 days,” said Prasanna Patwardhan, the president of Bus and Car Operators Confederation of India (BOCI), a lobby of transport vehicle fleet operators.

Meanwhile, insurers said even if that were the case, insurers wouldn’t be absolved of claim risks when vehicles were parked and not in use.

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“The clause is called ‘laid-up’ vehicle clause,” said an executive at private sector insurer, speaking on the conditions of anonymity. “A common misconception is that a fleet of vehicles when parked and not in use doesn’t command any insurance risk. This is not true; there are risks of damage due to natural disaster, maintenance issues, fire risks and even concerns of theft that are still there.”

The executive explained that the purpose of an advance intimation was to assess these risks and agree upon a compromised risk position between the owner and the insurer. Moreover, the insurance regulator had given vehicle owners facing liquidity issues an extension on renewal for policies expiring in April, he said.