Indian Supreme Court Issues Directions to Curb Uninsured Vehicles and Streamline Motor Accident Claims

The Supreme Court on Tuesday (August 4) issued a slew of directions to curb the number of uninsured vehicles plying on roads and streamline the motor accident claims process. Noting that “it is shocking to learn that nearly 56% of vehicles plying on Indian roads remain uninsured which stands at 16.54 crore vehicles” – as per data from a Standing Committee on Finance report from December 2024, the court has mandated technological integration of motor insurance for traffic enforcement and restructured how motor insurance is sold to citizens. The court observed that the lack of compliance with Section 146 of the Motor Vehicles Act, 1988 — which makes third-party insurance mandatory — forces victims into prolonged legal battles. Third-party insurance covers a vehicle owner’s financial liability for injury, death, or property damage caused to others in an accident, while excluding damage to the owner’s own vehicle. “The object behind mandatory insurance… is not just that victims of road accidents are compensated, it is also that they are not drawn into prolonged litigation,” the judgment, written by Justice Sanjay Karol on behalf of a bench comprising him and Justice P K Mishra, noted. The court emphasised the importance of vehicular insurance, stating that when vehicles remain uninsured, victims and their families have no recourse to adequate compensation within a reasonable time period. “The consequence is even more severe for families where the victim is deceased or has suffered permanent disability, as the financial impact on the family is significantly heightened.” The court noted that “[o]n average, there are more than four lakh road accidents in India every year”, of which 22% involve uninsured vehicles, as per government data. To strengthen the enforcement of the statutory mandate under the Act, the court issued several binding directives. State police forces are to be provided with handheld devices or downloadable applications linked to the central VAHAN portal — an online database of all vehicles in India — and the Insurance Information Bureau. This will allow officers to “monitor real-time insurance status of vehicles and impose challans for violations”, the court said. The bench also directed that Automatic Number Plate Recognition cameras, already deployed on highways, be integrated with data from insurance databases and the VAHAN portal for the issuance of automatic e-challans to uninsured vehicles. The court also extended the mandatory cover period for third-party insurance for new vehicles. While a 2018 Supreme Court order had fixed this at three years for cars and five years for two-wheelers, the bench has now directed that third-party insurance must be purchased for four years for new cars and six years for new two-wheelers. The Insurance Regulatory and Development Authority of India has been instructed to issue necessary directions immediately. The court has mandated a uniform four-layer structure for private vehicle insurance to help consumers make informed choices. This includes a base mandatory third-party policy, an optional cover for occupants or pillion riders, a personal accident cover and an own-damage cover. Insurance companies must now provide a “customer option form” and a “consumer-friendly customer information sheet” at the time of purchase. For older accident claims pending before the Motor Accident Claims Tribunals — which are specialised courts that deal with compensation claims — the state police have been directed to “promptly file” detailed accident reports and assist in producing witnesses to ensure speedy disposal of cases pending since March 2022 or before. Proposed pilot projects Alongside the mandatory orders, the Supreme Court proposed two pilot projects. First, the court asked the insurance regulator and the Union Ministry of Road Transport and Highways to “deliberate and evolve a pilot-project whereby fuel for vehicles to be linked with valid insurance status”. Under this proposed system, vehicles without valid insurance “would be refused fuel at petrol pumps”, a move the court believes will act as a strong incentive for getting insurance. Second, the court suggested a pilot project allowing citizens to verify the insurance status of a vehicle they are travelling in, which “will allow for prompt reporting of uninsured vehicles”. How the case reached the Supreme Court The case in which the directions were issued stems from a dispute over a 1996 road accident. T Ramu was returning to his village in a Maruti 800 car when a negligently driven lorry struck his car from behind, leading to his death. His family filed for compensation before the Motor Accident Claims Tribunal. In 2009, the tribunal denied compensation, reasoning that no extra premium was paid to cover the car owner’s personal risk. Follow our daily newsletter so you never miss anything important. On Wednesday, we answer readers' questions. The family appealed to the Telangana High Court, which reversed the tribunal’s order in 2024. The High Court awarded a compensation of Rs 10,00,500, noting that the vehicle had a “comprehensive policy” that covers the owner travelling as a passenger. The insurance company challenged this in the Supreme Court. Dismissing the appeal, the Supreme Court on Tuesday ruled that “in matters concerning motor accident claims, courts should not adopt a hyper-technical approach”, upholding the insurer’s liability.