Supreme Court Directs Nationwide Overhaul Of Motor Insurance Enforcement, Mandates Four-Layer Policy Structure And Extended Third-Party Cover

Holding that the statutory safeguard of accident-victim compensation under Section 146 of the Motor Vehicles Act, 1988 is "often delayed, if not defeated" by this compliance gap, the Court directed integration of Automatic Number Plate Recognition (ANPR) camera data with the Insurance Information Bureau and VAHAN portal for automatic e-challans, handheld verification devices for traffic police, a four-layer standardised insurance policy structure for private vehicles, and an increase in the mandatory tenure of third-party insurance purchased at the time of registration, from three to four years for new cars, and five to six years for new two-wheelers.

A Bench of Justice Sanjay Karol and Justice Prashant Kumar Mishra observed, “…It is shocking to learn that nearly 56% of vehicles plying on Indian roads remain uninsured as per the Report of the Standing Committee on Finance 2024–25…the stark figure of uninsured vehicles stands at 16.54 crore vehicles out of 30.48 crore vehicles. The consequent effect is that the statutory safeguard of victim compensation is often delayed, if not defeated. The object behind mandatory insurance under Section 146 of the MVA is not just that victims of road accidents are compensated, it is also that they are not drawn into prolonged litigation… it is directed that henceforth, third-party insurance for four years for new cars and six years for new two wheelers be required to be purchased. IRDA to immediately issue necessary directions”.

“As submitted by the IRDA, for private vehicles, a broad four-layer structure is to be implemented for private vehicles. This would bring clarity to various policy options for the vehicle-owner so as to allow them to make an informed choice”, the Bench further noted.

Advocate Meenakshi Midha appeared for the appellant while N. Venkataraman and Archana Pathak Dave, Additional Solicitors General and Senior Advocate Joy Basu appeared for the respondent.

The proceedings originated as an ordinary motor accident compensation appeal but evolved into a broader public-interest inquiry after the Court, by earlier orders in 2025, impleaded 22 insurance companies, the IRDA, and MoRTH to examine two larger issues: non-compliance with the mandatory third-party insurance requirement under Section 146 of the MVA, and the absence of a uniform policy structure covering all vehicle occupants. The Court directed these stakeholders to confer and file joint suggestions, which were examined in detail in the present judgment.

Drawing on submissions from the IRDA, the General Insurance Council, MoRTH, the Court noted that on average over 4.6 lakh road accidents occur annually in India, with e-DAR data showing 22% involving uninsured vehicles, and that nearly a third of all road accidents occur on national highways despite these constituting only about 2% of India's total road length.

The Court also referenced its recent recognition, in In Re: Phalodi Accident v. National Highways Authority of India and the Patna High Court's ruling in Abhijeet Kumar Pandey v. State of Bihar, that safe travel is an incident of the right to life and free movement under Articles 21 and 19(1)(d) of the Constitution of India.

Among the key directions issued:

ANPR cameras already deployed for road-safety violations are to be integrated with insurance databases for automatic detection of uninsured vehicles; State Police are to be equipped with handheld devices linked to real-time insurance data; a mandatory four-tier "customer option form" is to be introduced at the point of insurance purchase, comprising a base third-party-only policy, an optional legal-liability cover for occupants/pillion riders, an optional personal accident cover, and an optional own-damage cover; and IRDA is to draft uniform policy wordings for these add-on covers while leaving pricing to individual insurers. The Court also directed a pilot project linking fuel dispensation at petrol pumps to valid insurance status via ANPR technology, and a citizen-facing tool to verify a vehicle's insurance status.

On pending motor accident claims, the Court reiterated earlier directions from General Insurance Council v. State of Andhra Pradesh and M.R. Krishna Murthi v. New India Assurance Company Ltd. on timely filing of Detailed Accident Reports and speedy disposal, directing State Police to promptly file DARs and assist in witness production for accidents predating March 31, 2022, with these directions to be communicated through the High Court Legal Services Authorities.

Turning to the underlying appeal itself, the Court upheld the Telangana High Court's award of compensation to the family of a vehicle owner who died as a passenger in his own car following a hit-and-run by a lorry, rejecting the insurer's argument that no compensation was payable absent an extra premium for the owner's personal risk.

Relying on an IRDA circular dated November 16, 2009 and holding that motor accident claims must not be approached with "hyper-technical" rigidity, the Court held the comprehensive policy in question covered the owner as an occupant, and dismissed the insurer's appeal on this count.

All stakeholders were directed to file compliance affidavits by August 14, 2026, with the matter listed for further review on August 18, 2026.

Cause Title: National Insurance Co. Ltd. v. Smt. Thungala Dhana Laxmi & Ors. (Neutral Citation: 2026 INSC 793)

Appearances:

Appellant: Meenakshi Midha, Garv Singh, Sindhoora Ravindran, Vartika Gautam, Adv.; Mr. Chander Shekhar Ashri, AOR, Advocates.

Respondent: N. Venkataraman and Archana Pathak Dave, Additional Solicitors General; Joy Basu, Senior Advocate.

Click here to read/download the Judgment