Are you currently planning to purchase a brand-new car or a motorcycle? If so, you need to read this update first. The Supreme Court has issued a major directive for vehicle owners that will increase the initial cost of acquiring a new vehicle. However, this ruling is also expected to bring much-needed relief to victims of road accidents and their dependent families.
Mandatory Insurance Tenure Extended
On Tuesday, the Supreme Court ordered that customers purchasing new cars must now secure a four-year third-party insurance policy, while new two-wheeler buyers must opt for a six-year policy simultaneously. Previously, this mandatory duration stood at three years for cars and five years for bikes. The court emphasized that a vast number of vehicles ply on Indian roads without any valid insurance coverage, which creates massive hurdles for road accident victims seeking rightful compensation.
The directives were issued by a bench comprising Justice Sanjay Karol and Justice PK Mishra while hearing an appeal filed by National Insurance Company Limited. The court noted that despite directions issued eight years ago, the ground reality has not improved as expected, and millions of vehicles continue to run without mandatory third-party insurance today.
Regulatory Objections Overruled by Court
The bench observed that both the Insurance Regulatory and Development Authority of India and the General Insurance Council had recommended against increasing the mandatory insurance duration. Nevertheless, keeping road safety and public interest paramount, the court deemed it necessary to extend the tenure by one year. The court also directed the Insurance Regulatory and Development Authority of India to issue necessary operational guidelines in this regard immediately.
During the proceedings, the court highlighted a startling statistic, stating that approximately 56 percent of all vehicles running on Indian roads operate without any valid insurance policy. The bench termed this a matter of grave concern, noting that it defeats the very core purpose of mandatory insurance under the Motor Vehicles Act.
Why Third-Party Insurance Matters
The court acknowledged that families of those who lose their lives or sustain injuries in road mishaps often have to endure years of legal battles just to secure compensation. Given this reality, a robust and effective insurance system is the need of the hour. Although the Insurance Regulatory and Development Authority of India and the General Insurance Council argued that extending the insurance period would hike upfront premiums without necessarily deterring uninsured driving, the Supreme Court rejected this argument, asserting that broader public interest and road safety take precedence.
Approval of Four-Stage Motor Insurance Framework
Furthermore, the court approved a four-tier motor insurance framework for private vehicles. This structure includes mandatory third-party insurance, optional legal liability cover for passengers and pillion riders, personal accident cover for the owner-driver and passengers, and an optional own-damage cover for the vehicle itself.
Additionally, the Supreme Court directed that every customer, whether purchasing insurance online or offline, must be provided a customer option form. Through this form, buyers can select additional insurance covers tailored to their specific requirements.
