New vehicle owners to pay more upfront as SC extends third-party insurance

The Supreme Court has directed the Insurance Regulatory and Development Authority of India (IRDAI) to introduce a four-layer structure for private motor insurance policies and extend compulsory third-party insurance coverage to four years for new cars and six years for new two-wheelers, a move that is highly likely to increase the upfront cost of purchasing new vehicles.

The revamped framework will comprise a mandatory third-party insurance cover as the base policy, along with three optional layers: cover for occupants or pillion riders (excluding the owner-driver and family members of the insured), personal accident cover for the owner, driver and occupants or pillion riders, and own-damage coverage for the insured vehicle.

The court directed that all motor insurance buyers, whether purchasing policies online or offline, must be provided with a standardised “customer option form” that clearly enables them to choose additional covers.

Four-tier insurance structure

 

To ensure uniformity, the apex court asked IRDAI, in consultation with the General Insurance Council (GIC) and insurers, to develop standard policy wordings for the optional covers. At the same time, insurers will be free to innovate and price own-damage policies according to market dynamics.

The new framework is aimed at improving transparency and helping vehicle owners better understand and customise their insurance protection instead of purchasing bundled products without clear choices.

Push for tougher compliance through technology

 

The apex court noted that despite its 2018 directive mandating three-year third-party insurance for new cars and five-year cover for new two-wheelers, a significant number of vehicles remain uninsured.

Although both IRDAI and GIC had advised against extending the duration of mandatory cover, the court said road safety considerations warranted a one-year increase and directed the regulator to issue the required notifications immediately.

In a parallel push to curb uninsured driving, the Supreme Court ordered the Ministry of Road Transport and Highways (MoRTH) and IRDAI to strengthen enforcement using technology.

Automatic Number Plate Recognition (ANPR) cameras will be integrated with the Insurance Information Bureau database and the VAHAN portal, enabling authorities to automatically issue e-challans to uninsured vehicles under the electronic road-safety enforcement framework.Also Read: MeitY to question Meta on Indian law compliance, safeguards at August 5-6 meeting