Making a strong pitch for reforming India’s motor insurance framework, the Supreme Court has asked Insurance Regulatory and Development Authority of India (IRDAI) and 22 major insurance companies to explore the creation of a uniform motor insurance policy to better protect accident victims and vehicle owners.
A bench of justice Sanjay Karol and justice Prashant Kumar Mishra made the observation while hearing an appeal filed by National Insurance Company Ltd against a 2024 judgment of the Telangana High Court, which had directed the insurer to pay the claimants' compensation of about Rs 10 lakh along with interest. The Court’s concern, however, went beyond the specifics of the dispute, focusing instead on systemic gaps in motor accident compensation mechanisms and the lack of uniformity among insurance policies.
The bench observed that different insurance companies use varying terms and definitions in their policies, despite the Motor Vehicles Act recognising only three types of covers—third-party liability, standalone own-damage, and comprehensive policies.
Justice Karol noted that this inconsistency often confuses consumers and leads to disputes at the time of claims. “Our experience in motor accident claims tribunal (MACT) matters is that there is a reluctance on the part of the insurer to settle claims at the pre-litigation stage. There is strong opposition at the first level of adjudication and even at the stage of first appeal,” he says.
Justice Karol added that the 'normal lifespan of litigation in a MACT matter' is around eight to ten years, which not only delays justice for victims but also burdens the public exchequer. “When matters come to us, we find there is an increase in compensation amounts, plus payment of interest. All this is a drain on public funds. Consumers are not even aware of the various policies available,” he remarked.
The Court identified a lack of consumer awareness and reluctance by insurers to settle claims early as key concerns in ensuring timely redressal.
The bench called upon IRDAI to take the lead in driving a uniform policy structure, suggesting that such standardisation would greatly benefit consumers and simplify claims. “We are not policymakers, but is it not possible for you all to sit together and come up with a uniform policy? For you to make consumers aware of what policies are available?” Justice Karol asked the general managers of IRDAI, the insurance companies, and the General Insurance Council. He further observed that the regulator would be doing a “great service to the nation” if it followed through with the effort.
Justice Karol urged the industry to identify common ground and harmonise the terms of insurance coverage. “Please think of what all commonalities can be there in your insurance policies. Maybe you can have a one-time measure to better protect consumers. You have to make the owner aware; you have to tell what difference is there in insurance coverage,” he says.
The Court has listed the matter for hearing after two weeks. It has allowed senior executives to appear in place of general managers, while additional solicitor general Archana Pathak Dave will assist the bench on behalf of the Union government.
During the proceedings, the bench expressed shock after learning that more than 50% of vehicles currently on Indian roads are not insured. Senior counsel Joy Basu, appearing for the respondents, informed the Court that nearly half of India’s vehicles lack any form of insurance coverage.
Justice Karol reacted with surprise, exclaiming, “My God! 50%?”
Mr Basu urged the Court to consider issuing directions for coercive enforcement measures to address the situation. Justice Karol agreed, saying, “That is a good point. Suggest measures, we will issue directions,” and hinted that the authorities could even consider systems like impounding vehicles when challans remain unpaid.
The revelation underscored a grave public safety concern. Operating an uninsured vehicle violates the Motor Vehicles Act and leaves accident victims uncompensated when tragedies occur. The Supreme Court’s push for reform thus has both consumer protection and public policy dimensions, as standardising coverage could increase transparency and promote greater compliance.
The case that prompted these observations—National Insurance Company versus Thungala Dhana Laxmi and Others [SLP(C) No. 8563/2025]—has a long and tragic history. The dispute stems from a 1996 accident in which the husband of Ms Dhana Laxmi died while travelling in his own insured car. In 2003, she and her two children filed a claim seeking Rs10 lakh in compensation, alleging that the accident was caused by the negligent driving of a lorry. The insurer contested the claim, arguing that the comprehensive 'private car package policy' did not cover the deceased owner (the husband of Ms Dhana Laxmi) as he was not a 'third party'.
In 2009, the motor accident claims tribunal (MACT) dismissed the claim on that ground, holding that no extra premium had been paid to cover the owner’s personal risk. However, the Telangana High Court in 2024 reversed the decision, ruling that a comprehensive policy covers all occupants of the car, thereby entitling the claimants to compensation. The insurer then approached the Supreme Court, which stayed the High Court order in March 2025 and later impleaded IRDAI and 22 insurance companies as parties to examine broader policy issues.
The Court’s present intervention has transformed what began as an individual dispute into a potential catalyst for national reform. If IRDAI and insurers manage to establish a standardised framework for motor insurance, it could drastically reduce litigation, improve consumer confidence, and ensure quicker compensation for accident victims.
The matter will be taken up again in two weeks, when IRDAI and the insurance companies are expected to present their suggestions on achieving uniformity and enhancing consumer awareness.
