Only a third of the vehicles in India were insured in 2009-10, according to an information bureau, set up by the regulator.

Of the 12 crore automobiles and two-wheelers on Indian roads, less than four crore vehicles had any type of insurance cover in 2009-10, according to data available with the Insurance Information Bureau (IIB), which was set up by the Insurance Regulatory Development Authority (Irda) in 2009 to provide data to researchers and policy makers. "Customers do not renew their car policy. This is partly because the value of the vehicle comes down," said ICICI Lombard motor insurance head Sanjay Datta.

Vehicle insurance has two components - own damage cover, which is triggered when the vehicle is damaged in an accident; and third-party liability, which covers any injury or damage caused to another person or vehicle.

Driving an uninsured vehicle is prohibited under the Motor Vehicles Act, 1988. Violation is punishable with imprisonment for three months, or a fine of Rs 1,000 or both. Datta said there should be fine mechanism to enforce third-party insurance covers, adding that vehicle owners generally do not renew policies after five years. "New vehicles do not go without a cover. About 3-4 year-old vehicles are insured, but as they get older, people stop renewing the policy. Penalty is not serious, whereas if you are caught without one in a foreign country, there is a chance of losing one's licence," said Gautam Modi, a dealer at Ford.

The claim ratio in the own-damage segment is significantly lower compared to third-party covers. Although third-party insurance is mandatory in India, 40% of vehicles on road did not have this cover in the year under review.

Incurred claim ratio in the thirdparty segment was nearly 98% at.`4,380 crore. For the own-damage segment, it was 55%.

The insurance regulator has recently increased provisioning towards the third-party motor pool, following which companies have infused capital to boost their solvency margin.

A senior executive of Oriental Insurance Company said: "Insurance is a must for registering vehicles, so no vehicle is sold without insurance. Things are compulsory but not enforced." Incurred claim ratio is the claims paid during the year plus closing provision at the end of the year and is expressed as a percentage to the premium.