NEW DELHI: The Supreme Court has urged the Insurance Regulatory and Development Authority of India (IRDAI) and 22 major insurers to consider a uniform motor insurance policy to better protect vehicle owners and accident victims.
The observations came from a Bench of Justice Sanjay Karol and Justice Prashant Kumar Mishra while hearing a case related to a 1996 accident, in which the insurer disputed compensation claims. The Court highlighted systemic gaps in motor insurance and compensation mechanisms that often delay justice.
Currently, insurers use different terms and definitions, despite the Motor Vehicles Act recognising only three types of coverage: third-party liability, standalone own-damage, and comprehensive policies. The Bench noted that this inconsistency confuses consumers and fuels disputes at the claims stage.
Justice Karol remarked that insurers often resist early settlements, leading to drawn-out litigation. “The normal lifespan of a motor accident claim tribunal (MACT) case is around eight to ten years,” he said, adding that delayed settlements increase compensation and interest payments, burdening public funds.
The Court also raised alarm over low insurance penetration. Senior counsel Joy Basu told the Bench that more than 50 per cent of vehicles on Indian roads are uninsured, a figure that shocked the judges. Justice Karol reacted: “My God! 50 per cent?” He indicated that authorities could explore stricter enforcement measures, such as impounding vehicles with unpaid challans.
Need for consumer awareness
The Bench called on IRDAI to lead the effort in standardising policies and enhancing consumer awareness. Justice Karol asked insurers to identify common coverage elements and simplify terms, stressing that such steps would be a “great service to the nation.”
The matter, listed for further hearing in two weeks, requires IRDAI and insurers to present proposals for policy uniformity and consumer education.
The underlying case — National Insurance Company Ltd vs Thungala Dhana Laxmi & Others (SLP No. 8563/2025) — stems from a fatal accident in 1996. The Telangana High Court in 2024 ruled that a comprehensive policy covers all car occupants, entitling the claimants to compensation of about Rs 10 lakh. The insurer challenged the decision before the Supreme Court, prompting broader discussions on standardisation.
The Court’s intervention highlights major shortcomings in India’s motor insurance framework: inconsistent policy terms, low coverage, delayed claim settlement, and weak enforcement. Establishing a uniform policy framework could reduce litigation, improve transparency, and ensure timely compensation for accident victims.
