The Insurance Regulatory and Development Authority of India (IRDAI) has declined a request to exempt or reduce insurance premiums for school buses during the COVID-19 lockdown period. This decision came after a directive from the Madras High Court in response to petitions filed by educational trusts. The petitioners, including the Association of Management of Coimbatore Anna University Affiliated Colleges and Om Sri Vivekananda Educational Trust, argued that since their buses were unused during the lockdown, they should not have to pay full premiums.
In its order, the IRDAI provided several reasons for its decision. The Authority noted that any such policy change would have widespread consequences for all vehicles and insurance companies across the country. It distinguished between two parts of a motor insurance policy: the mandatory Third-Party (TP) insurance and the optional Own-Damage (OD) insurance. For TP insurance, the IRDAI clarified that it lacks the authority to change premium rates, as these are set by the Central Government under the Motor Vehicles Act, 1988, with the IRDAI’s role being consultative. The government had not provided any relaxation on this front.
Regarding OD insurance, the IRDAI stated that even if buses were stationary, they were still exposed to risks like fire, theft, or natural disasters, all of which are covered by the policy. The Authority also pointed out that it would be “practically impossible to verify” the actual usage of each vehicle during the lockdown. It concluded that because an insurance policy is a contract based on the anticipation of future, unforeseen events, it is not possible to retroactively change its terms or pricing. The IRDAI emphasized that insurers continued to cover risks during the lockdown, including major events like cyclones, and received claims for losses to school buses during that period. Consequently, the request to vary coverage or reduce premiums was denied.
Insurance Regulatory And Development of India
Ref No. IRDAI/NL/ORD/MISC/99/8/2025 | Date: 26.08.2025
Order of the Insurance Regulatory and Development Authority of India issued in compliance with the direction of the Hon’ble Madras High Court Order in WP Nos. 6484 & 6492 of 2021 with regard to representation dated 04.12.2020 to formulate a viable policy to exempt buses of educational institutions from payment of insurance premium or proportionately reduce the premium amounts, for the closure period on account of Covid-19 pandemic
1. The Govt. of India imposed complete lock-down in the country from 25th March, 2020 to 14th April, 2020 and extended till 31st May, 2020 to curtail the spread of the Covid-19 pandemic. During the lockdown period the movement of vehicles was restricted and the educational institutions remained closed. Some of the states extended the closure of educational institutions for a longer duration.
2. In view of the restricted movement of vehicles during the lock down period, M/s Om Sri Vivekananda Educational Trust represented to the Insurance Regulatory and Development Authority of India (hereinafter referred to as IRDAI or the Authority) vide letter dated 04.12.2020 to formulate a viable policy exempting the buses of educational institutions from payment of insurance premium for the closure period of the educational institution or alternatively, to proportionately reduce the premium amount for the closure period.
3. Subsequently, the Association of Management of Coimbatore Anna University Affiliated Colleges and M/s Om Sri Vivekananda Educational Trust filed Writ Petitions nos. 6484 of 2021 and 6492 of 2021 respectively before the Hon’ble Madras High Court seeking directions to IRDAI to formulate a viable policy exempting buses of educational institutions from payment of insurance premium for the closure period of the educational institutions, or alternatively, to proportionately reduce the premium amount for the closure period. In both petitions, IRDAI was arrayed as First Respondent.
4. The Hon’ble Court, in the case of WP No. 6484 of 2021, has passed an order dated 12.11.2024 directing IRDAI as follows,
“In view of the objection raised by the first respondent in WP No. 6484 of 2021, without going into the merits of the claim made by the petitioner in WP No. 6484 of 2021, this court is inclined to issue a direction to the first respondent to consider the representation of the petitioner dated 04.12.2020 and pass final orders, after issuing
notice to all interested parties, within a period of twelve weeks from the date of receipt of a copy of this order.
In view of the order passed by this Court in WP No. 6484 of 2021, directing the first respondent to consider the representation of the petitioner dated 04.12.2020, no separate orders need to be passed in WP No. 6492 of 2021. Therefore Writ Petition No. 6492 of 2021 is closed. No Costs.”
5. Pursuant to the Order of the Hon’ble High Court, notices dated 06.02.2025 were sent to the petitioners – The Association of Management of Coimbatore Anna University Affiliated Colleges, Coimbatore and Om Sri Vivekananda Educational Trust, Salem, and to General Insurance Council, which represents the General Insurance companies.
6. The notice issued to Association of Management of Coimbatore Anna University Affiliated Colleges, Coimbatore, was returned unclaimed, and no reply was received from the other petitioner M/s Om Sri Vivekananda Educational Trust, Salem.
7. In view of circumstances beyond control, and as the exercise could not be effectively concluded, the Hon’ble Madras High Court was requested for an extension of eight weeks to pass the order. The Hon’ble Madras High Court, vide order dated 04.07.2025, granted an extension for eight weeks to pass final orders from the date of its order granting the extension.
8. Subsequently, notices were issued for the second time, vide letters dated 16.07.2025 to the petitioners seeking their explanation/submission. The Authority received the submissions of the petitioners, vide letters dated 30.07.2025.
9. In compliance with the order of the Hon’ble Madras High Court dated 12.11.2024, the representation of the petitioners dated 04.12.2020 was examined and considering the submissions of the petitioners and the insurance companies, made through the General Insurance Council, the Authority concludes that
I. The current representation made by the petitioners cannot be viewed in isolation in terms of being applicable only to the petitioners. Any decision on the petition will have far reaching consequences on all the vehicles in the country, owners of such vehicles and the insurance companies that have issued insurance policies for such vehicles. Hence, the matter must be considered in its entirety, with applicability across all geographies and segments.
II. A Motor Vehicle insurance policy has two distinct sections which are priced separately i.e. Third Party insurance(TP) covering liability to third parties and Own-Damage Insurance(OD) covering damage, theft and loss to the vehicle itself. While TP insurance is mandatory, OD insurance is optional.
III. Motor third party insurance is mandated for all motor vehicles under Section 146(1) of the Motor Vehicles Act, 1988 (and amendments thereof) (hereinafter referred to as MV Act) .
IV. Further Section 147(2) of the MV Act provides as under
“Notwithstanding anything contained under any other law for the time being in force, for the purposes of third party insurance related to either death of a person or grievous hurt to a person, the Central Government shall prescribe a base premium and the liability of an insurer in relation to such premium for an insurance policy under subsection (1) in consultation with the Insurance Regulatory and Development Authority.”
V. It is evident from the plain reading of Section 147(2) that any modification of premium pertaining to Third Party insurance can only be prescribed by the Central Government, in consultation with IRDAI.
VI. In the case of TP insurance it would not fall within IRDAI’s exclusive authority to make changes in the insurance coverage or pricing. The coverage and pricing is determined and notified by the Central Government and IRDAI’s role is only consultative.
VII. Following the announcement of lockdown due to Covid-19 pandemic, the Central Government did not provide any relaxation to motor vehicle owners of any sector from the provisions of the MV Act in respect of mandatory Motor third party insurance. The Ministry of Road Transport and Highways of India (MoRTH), which notifies the Motor Third Party rates, did not announce any variation in premium rates during the lockdown period.
VIII. Own Damage losses covered under a motor policy may occur not only when a vehicle is put to use on the road, but also when a vehicle is parked and remains stationary, since insurance policies cover loss or damage due to accidental external means, including risks such as theft, fire, flood etc.
IX. Although educational institutions may have been closed, it cannot be assured that the buses were entirely unused during the lockdown period. Unauthorized or incidental usage for maintenance, emergency transport or any other purpose could still have occurred, which might have led to accidents. In such cases, insurers would still be required to settle claims according to the policy terms and conditions. It is practically impossible to verify the actual usage of each vehicle during the lockdown period. Additionally, in many instances buses may have been requisitioned by authorities for any purpose and used as per their requirements.
X. Under a motor insurance policy, premium is considered for the entire period of insurance, irrespective of the level of risk, which may fluctuate during the entire duration of the policy.
XI. Insurance is a contract, wherein both the insurer and insured are bound by the terms of the contract. Any direction to refund or adjust premium, as demanded by the petitioner, would have to be within the terms of the insurance contract.
XII. It is a matter of record that insurers have received claims reported for losses to school busses occurring during the Covid-19 Lockdown period.
XIII. Sudden catastrophic events may result in unprecedented losses from a single event such as floods, earthquakes, cyclones etc. Insurers continue to cover for such eventualities during the validity of the insurance policy and to settle claims (if valid) without any demand for additional premium, as per the terms & conditions of the insurance contract. It may be noted that several catastrophes like Nisarga (June 2020), Yaas (May 2021), Tauktae (May 2021) etc. occurred during the Lock-down period in addition to various incidents of heavy rains and inundations and insurers would have held such risks covered during the currency of issued insurance policies.
XIV. An insurance policy is issued in anticipation of future fortuitous events. Events for which an insurance is taken can never be known in advance. Circumstances that increase or decrease the probability of occurrence of such events also cannot be predicted with certainty. This inherent uncertainty plays a key role in the design and pricing of any insurance product. Accordingly, it is neither possible nor appropriate to revise coverages and pricing after the period of coverage is over, whether in part or whole.
XV. Consequently, insurers can neither revise any terms of coverage nor the pricing of the insurance policies retrospectively, for the policies issued by them including those issued to cover School buses.
10. In light of the foregoing arguments, for both TP and OD insurance coverage, it is neither feasible nor desirable for IRDAI to formulate any policy or issue any directions to either vary the coverage or any reduction in premium for the period of lock-down on account of Covid-19 pandemic.
11. Therefore, the representation of the petitioners seeking formulation of a viable policy to exempt buses of educational institutions from payment of insurance premium or to proportionately reduce the premium amounts, for the closure period on account of Covid-19 pandemic is hereby declined.
12. This representation is accordingly disposed of.
Digitally signed by
DEEPAK SOOD
Dated: 2025.08.26
17:28:13+05’30’
(Deepak Sood)
Member (Non-Life)
Place : Hyderabad
Date : 26.08.2025
