SC links pollution with car insurance cover: What you should do 

Insurers are gearing up to check for PUC at the time of issue or renewal of a car insurance policy as well as at the time of own damage claims. Photo: iStock

Insuring your vehicle may get difficult in future if your vehicle doesn’t have a valid pollution under control or PUC certificate. Based on a Supreme Court order, the Insurance Regulatory and Development Authority of India (Irdai), through its circular dated 6 July, has directed insurers to not renew insurance of vehicles without a PUC certificate. 

But it may take some time before things are put in practice fully as there are significant challenges in its implementation.

PUC is mandatory

A PUC certificate is mandatory as per the Central Motor Vehicles Rules 1989. The rules state that after the expiry of a year from the date on which the vehicle was first registered, it will need to carry a valid PUC certificate issued by an agency authorised for this purpose by the respective state government. The validity of the certificate is for six months. 

Further, in an attempt to curb pollution, the Supreme Court, in August last year, directed insurers to not renew motor insurance if the vehicle did not have a PUC certificate. Upholding the directive, Irdai has now issued a statement asking insurers to comply with the orders. However, this could mean denying vehicle insurance to policyholders which too is against the rules.

“Insurers are bound by the Insurance Act not to deny motor third party insurance; whilst owners of vehicles are bound by MV Act (Motor Vehicle Act) not to drive the vehicle in public places without valid third party insurance. So SC’s ruling on PUC and Irdai circular advising insurers to verify the validity of PUC before insuring the vehicles conflicts with the statutory and regulatory prescriptions for insurers. It is not fair to put insurance on the block for enforcing pollution control of vehicles,” said R. Chandrasekaran, secretary general, General Insurance Council, an industry body that represents insurance companies. “On behalf of the insurance industry, the General Insurance Council is planning to approach SC with a plea to review its directions on insurance and PUC,” he added. 

Third party motor insurance cover compensates for any damages made to a third party by the insured person. Without this cover, you can’t take your car out of the showroom. It’s also important because in case an accident causes bodily injury or loss of life to a third party, the court decides the compensation and since the third party cover is unlimited, the entire compensation is borne by the insurance policy.

Implementation problem

If insurers are mandated to renew motor insurance only if a valid PUC certificate is produced, they will have to deny third-party cover to those not having it, which the Insurance Act does not allow. 

Moreover, motor insurance is not limited to third-party cover. It also comprises own damage cover that insures the vehicle against theft or damage, and personal accident cover for the driver and passengers.

According to insurers we spoke to, not having a PUC may also have a bearing on claims.

“It is necessary to appreciate that motor third-party cover, which ensures compensation to victims of road accidents can’t be linked to pollution control. PUC is an enforcement issue and it is for the police and RTO (regional transport office) who have the enforcement powers to verify this compliance. If petrol pumps can be asked to verify PUC every time the vehicle comes for a fuel refill, PUC compliance would go up,” said Chandrasekaran. 

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But insurers are gearing up to check for PUC at the time of issue or renewal of a policy as well as at the time of own damage claims, he added. 

Another challenge for the insurance companies will be verification of the PUC certificate. “In smaller towns and cities, PUC certification is not prevalent at all. PUC tests are disorganised with only a handful of big cities enforcing it. Also, there is no digital repository to verify the certificate so it’s going to be challenging for the insurers,” said Mahavir Chopra, director, health life and strategic initiatives, Coverfox.com, an online insurance broker. 

In fact, the additional requirement of PUC document may make it difficult to renew motor insurance online. “Asking for PUC document takes away from making the insurance buying process seamless, something that online tech-enabled platforms like ours have enabled. Currently, we simply take vehicle details which can be obtained from the previous insurance copy or the vehicle registration certificate (RC) to renew the policy. Adding the requirement of a PUC certificate will make the process more manual and there is no way of validating the PUC,” said Balachander Sekhar, co-founder and chief executive officer of RenewBuy.com, an online insurance broker. 

“We anticipate significant challenges given the low levels of PUC outside top 7-8 cities. More so for two- wheelers where more that 75% are uninsured, and may hinder in bringing them into the insurance fold,” said Sekhar.

Status right now

While Irdai has asked insurers to comply with the court order, it’s not simple for insurers to implement it as they will need to recalibrate their systems. 

Couple of insurers we spoke to on the condition of anonymity, said they will continue to issue policies but they are putting in place a system to check for PUC certificates and are asking for PUC if the process is offline.

According to Chopra, insurers have not made any changes to the systems yet and so far if the customer renews online, they are not being asked for a PUC certificate.

Mumbai-based Nikunj and Nikita Mehta, who bought a second-hand Verna, got car insurance from a private insurer last week without being asked to submit a PUC certificate. “Since the previous owner didn’t give us insurance papers, we had to get the car insured again. A surveyor was appointed to inspect the car and we had to give the registration certificate. We were not asked for a PUC,” said Nikita. 

However, going forward, if the court stands its ground, not having a PUC may not only mean you don’t get insured, it may also have a bearing on your claims. Insurers may deny claims on the basis of absence of a PUC certificate. The matter may take time to resolve, but it’s a good idea to get a PUC certificate if you don’t have it because that’s the rule anyway.