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Cancelling RC After Getting Car Scrapped
Aug 17, 2022

Why Should You Cancel Your RC After Getting Your Car Scrapped?

The Ministry of Road Transport and Highways (MoRTH) implemented the Vehicle Scrappage policy in the budget laid down in February 2021. According to the policy, every vehicle past its validity of registration must undergo a fitness test to attain its renewal. Upon failure, it would get scrapped. This policy helps keep the old and unfit vehicles off the road, paving way for a greener and cleaner environment. Now, if you are an owner of an old car that either has an expired registration certificate or is nearing expiry, you have two options — to renew its registration or scrap it. If you choose the latter option of scrapping it, you will need to keep in mind its impact on the car insurance plan.

Impact of vehicle scrappage on car insurance plan

As per the Motor Scrappage Policy, vehicles older than 15 or 20 years, depending on the type of vehicle, need to be de-registered and scrapped upon failing the fitness test. Here’s how it impacts your car insurance:
  • The primary impact of scrapping unfit vehicles is that manufacturers can have access to industrial materials such as aluminium, copper, steel, rubber, and plastic, from all the unfit cars. With these components available at cheaper rates, the overall manufacturing cost can be brought down.
  • With a lower cost of the vehicle, the insurance cost for them would also come down since the Insured Declared Value or IDV of the car is its approximate market value, which in effect impacts car insurance prices.
  • The third-party premiums are regulated by the Insurance Regulatory and Development Authority of India (IRDAI), the regulatory body, and yet, there are a high number of third-party claims. Since most old cars are not fit, these third-party claims are raised against such old cars in comparison to own-damage claims raised for them. If these old cars are scrapped, these third-party claims are expected to reduce since the unfit cars will be off the road. You can visit the official website of IRDAI for further details.
  • Incurred Claims Ratio or ICR is a metric to indicate the value of total claims settled vis-a-vis the value of total premiums received. Since these old cars that are unfit contribute to increasing the ICR of the insurance companies, scrapping of unfit cars will bring it down.
* Standard T&C Apply Thus, whenever opting for the scrapping of your vehicle, there are two important things to do: cancelling your vehicle’s registration certificate (RC) and also cancelling its active insurance cover.

Why do you need to cancel the RC before scrapping your vehicle?

There are two main reasons why RC cancellation is an essential step in the vehicle scrappage process:
  • Misuse of car’s documents

Not cancelling the RC before scrapping your vehicle can lead to misuse of the registration details by fraudulent individuals for criminal or illegal activities. Hence, it must be cancelled without skipping this requirement.
  • Prevention of vehicle theft

Cancelling the RC helps prevent criminals from using your vehicle’s documents for a stolen car. This in turn helps avoid theft. * Standard T&C Apply

Refund of premium for cancelled RC

After cancelling the RC of your car, you can apply to the insurance company for any refunds of the premium paid on a proportionate basis. However, if you have made any claims, no refunds shall be issued. Thus, it is essential to cancel not just the registration but also inform the insurance company of the same. In case you choose to renew the registration by passing the fitness test, make sure to purchase a robust car insurance plan. In this process, using a car insurance calculator will help to evaluate several plans and pick one that fits your right. * Standard T&C Apply Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.

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