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Mumbai.If your vehicle does not have valid insurance, filling petrol or diesel could soon become difficult. The government is preparing to introduce a ‘No Insurance, No Fuel’ system following directions from the Supreme Court.

Under the proposed system, cameras installed at petrol pumps will scan vehicle number plates and check their insurance status. If a vehicle does not have valid third-party insurance, the fuel station could refuse to dispense petrol or diesel.

The Insurance Regulatory and Development Authority of India (IRDAI) is expected to begin trials of the system in select cities. The move is aimed at curbing the growing number of vehicles being driven without mandatory insurance.

Third-party motor insurance is mandatory

The trial will test whether a vehicle’s insurance status can be verified instantly when it arrives at a fuel station. Third-party motor insurance is legally mandatory in India, but more than half of vehicle owners reportedly fail to renew their policies.

The proposed system is therefore intended to improve compliance with the law and ensure that vehicles on Indian roads have at least the mandatory third-party cover.

• Petrol pumps will be connected to vehicle insurance records.
• Cameras will scan registration number plates.
• Vehicles without valid third-party insurance could be denied fuel.

Supreme Court orders pilot project from Delhi

A Bench of Justices Sanjay Karol and Prashant Kumar Mishra directed the Centre on August 4 to begin a pilot project from Delhi. Under the proposed arrangement, petrol pumps will be linked with records of valid third-party motor insurance.

If a vehicle is found to have no valid insurance, the fuel station will refuse to provide petrol or diesel. The owner will have to obtain valid insurance before being allowed to refuel the vehicle under the proposed system.

What exactly is third-party insurance?

Third-party insurance covers financial liability arising when a vehicle causes injury, death or damage to another person, another vehicle or third-party property. It does not cover damage to the vehicle belonging to the policyholder.

Section 146 of the Motor Vehicles Act makes third-party motor insurance legally mandatory for vehicles in India. The basic purpose is to ensure that victims of road accidents have access to financial compensation.

When an uninsured vehicle is involved in an accident, victims or their families may face prolonged legal proceedings to establish liability and secure compensation. The consequences can be particularly severe when an accident kills or permanently disables the family’s primary earning member.

New vehicles may need longer insurance cover

The Supreme Court has also extended the mandatory period of third-party insurance required when new vehicles are registered. The change adds one year to the existing mandatory cover.

• New cars: Four years of third-party insurance instead of three.
• New bikes and scooters: Six years instead of five.

The earlier rules, introduced in 2018, required three years of third-party cover for cars and five years for two-wheelers. Despite the requirement, millions of vehicles continue to operate without valid insurance, prompting measures aimed at improving compliance.

Owners may get wider policy choices

The court has directed IRDAI to provide private vehicle owners with different insurance options and customisation choices. Apart from the mandatory third-party cover, owners should be able to select additional protection according to their requirements.

These options could include:

• Personal accident cover.
• Add-on covers.
• Own-damage insurance.
• A combination of third-party and additional covers.

The idea is to give vehicle owners greater flexibility while ensuring that the mandatory third-party requirement is met.

Police may get real-time insurance checks

At present, there is no single uniform system across states that allows police personnel to instantly verify a vehicle’s insurance status during roadside checks. The court has therefore directed that state police forces be equipped with handheld devices or mobile applications.

These systems will be linked directly to the VAHAN portal and the Insurance Information Bureau database. Police personnel will then be able to check a vehicle’s insurance status in real time and issue an e-challan where required.

Insurance industry could see higher premium collections

A stricter ‘No Insurance, No Fuel’ system could also affect the general insurance industry by increasing the number of vehicle owners purchasing or renewing policies.

₹48,400 crore market share: The top five motor insurers — ICICI Lombard, New India Assurance, Tata AIG, United India Insurance and Bajaj General — collected around ₹48,400 crore in motor premiums in financial year 2026, accounting for about 45% of the total segment.

Demand may rise: An insurance executive said the eventual impact will depend on how many vehicle owners purchase own-damage cover along with mandatory third-party insurance.

The proposed system is therefore expected to combine fuel-station technology, insurance databases and enforcement mechanisms to improve compliance. Its immediate test will be whether insurance status can be verified quickly and accurately enough to make the system workable at busy petrol pumps.