The Supreme Court has proposed a major overhaul of India’s motor insurance regime, suggesting that fuel stations could eventually deny fuel to vehicles without valid insurance coverage. The proposal forms part of a pilot project aimed at tackling the growing number of uninsured vehicles on Indian roads.
A Bench comprising Justices Sanjay Karol and Prashant Kumar Mishra observed that nearly 56 percent of vehicles operating across the country are uninsured, a situation that undermines the very purpose of compulsory motor insurance and leaves accident victims struggling for compensation.
According to the Court, the absence of insurance protection often results in lengthy legal battles and delays in financial relief for families affected by road accidents. Describing the figures as alarming, the Bench noted that mandatory insurance safeguards are frequently rendered ineffective.
Fuel supply linked to insurance status
As part of a broader reform package, the Court asked the Ministry of Road Transport and Highways and the Insurance Regulatory and Development Authority of India (IRDAI) to work on a pilot mechanism that would connect fuel supply with a vehicle’s insurance status. The Ministry of Petroleum and Natural Gas has reportedly expressed no objection in principle to the proposal.
The Court said such a system could discourage uninsured vehicles from operating on public roads while encouraging owners to renew their policies on time.
Insurance period for new vehicles extended
The Bench directed IRDAI to increase the mandatory third-party insurance period for newly purchased private cars from three years to four years. For two-wheelers, the compulsory insurance cover has been extended from five years to six years.
The Court reasoned that despite earlier measures mandating long-term insurance for new vehicles, millions of vehicles continue to remain outside the insurance net, making further intervention necessary.
Cameras and e-challans to identify violators
To strengthen enforcement, the Court ordered that Automatic Number Plate Recognition (ANPR) cameras installed on highways and city roads be linked with the VAHAN database and insurance records. The integration would enable authorities to automatically detect uninsured vehicles and issue electronic challans.
Traffic police personnel have also been directed to be equipped with mobile applications and handheld devices connected to these databases, allowing instant verification of insurance documents during inspections.
Under the amended framework proposed by the Court, driving without insurance could attract significantly higher penalties. A first-time offender may face a fine equivalent to three times the annual insurance premium or ₹5,000, whichever is higher. Repeat violations could invite penalties of up to five times the premium or ₹10,000.
Public verification system under consideration
The Court has additionally suggested a pilot project that would allow ordinary citizens to check whether a vehicle carries valid insurance. Such a platform could help passengers, employers and others verify insurance status and report violations.
The Bench also encouraged the continued rollout of barrier-free toll collection systems using ANPR technology, noting that shorter queues at toll plazas would contribute to safer roads.
Simpler insurance products for consumers
Seeking to simplify motor insurance, the Court approved a four-tier structure for private vehicle policies. Third-party insurance will remain compulsory, while vehicle owners may choose optional protections covering:
- Liability for occupants and pillion riders.
- Personal accident cover for owners, drivers and passengers.
- Damage to the insured vehicle.
Insurance companies have been directed to provide customers with a standard option form, both online and offline, clearly setting out the available choices. They must also issue easy-to-understand information sheets explaining the scope of mandatory and optional coverage.
In addition, insurers will have to display the benefits of comprehensive policies prominently on their websites.
Faster accident compensation
The Bench also addressed delays in compensation claims arising from road accidents. State police authorities have been instructed to promptly submit detailed accident reports in pending cases involving accidents that occurred before March 31, 2022.
Police departments have further been directed to ensure the timely production of witnesses before Motor Accident Claims Tribunals so that compensation cases can be resolved without unnecessary delay.
Case that triggered the ruling
The directions emerged while the Court was hearing an appeal filed by an insurance company against a Telangana High Court order awarding compensation to the family of a man who died in a road accident while travelling in his own insured vehicle.
The insurer argued that the policy did not cover the deceased owner’s personal risk because no additional premium had been paid. Rejecting the argument, the Supreme Court upheld the compensation award of ₹10,00,500 along with 7.5 percent annual interest.
The Bench stressed that courts dealing with motor accident claims should avoid an overly technical approach and reiterated that comprehensive insurance policies extend protection to occupants, including the vehicle owner.
The case itself stemmed from an accident that occurred in July 1996, meaning the victim’s family waited almost three decades before the compensation dispute finally reached its conclusion. Stakeholders have been directed to submit compliance reports by August 14, with the matter scheduled for further consideration on August 18.
