Winning Bizness Desk
Mumbai.The Supreme Court has proposed a major change in the way vehicle insurance rules are enforced in India, directing the Centre to prepare a pilot project under which vehicles without valid third-party insurance may be denied petrol or diesel at fuel stations. The move is aimed at tackling the growing number of uninsured vehicles on Indian roads and ensuring that road accident victims receive timely compensation.
The directions came from a Bench of Justice Sanjay Karol and Justice Prashant Kumar Mishra. Along with the fuel-linked compliance plan, the court has also extended the mandatory third-party insurance period for newly purchased vehicles, saying existing measures have failed to achieve full compliance even after several years.
Pilot project links fuel with insurance
The court has asked the Centre, the Insurance Regulatory and Development Authority of India (IRDAI) and the Ministry of Road Transport and Highways to jointly develop the pilot project. Under the proposed system, petrol pumps will be digitally connected with insurance records.
Automatic Number Plate Recognition (ANPR) cameras installed at fuel stations and key roads will verify a vehicle's insurance status by matching registration details with the Insurance Information Bureau (IIB) and the VAHAN database. If the insurance is found to have expired, fuel stations will refuse to supply petrol or diesel until the policy is renewed. The Ministry of Petroleum and Natural Gas has agreed to the proposed framework.
Millions still drive without insurance
The Supreme Court observed that nearly 56% of vehicles plying on Indian roads currently do not have valid insurance, citing data placed before it. According to the Standing Committee on Finance (2024-25), this has left thousands of accident victims and their families struggling to obtain timely compensation.
Key reasons behind the court's decision include:
- Around 56% of vehicles are reportedly uninsured.
- Accident victims often face long legal battles for compensation.
- Existing insurance rules have failed to ensure compliance.
- Third-party insurance is legally mandatory under Section 146 of the Motor Vehicles Act.
Longer mandatory insurance for new vehicles
The court has also increased the compulsory third-party insurance period for newly registered vehicles by one year.
The revised rules are:
- New cars must now carry four years of third-party insurance instead of three.
- New motorcycles and scooters must now have six years of third-party insurance instead of five.
The earlier norms introduced in 2018 have not produced the desired results, with millions of vehicles continuing to operate without insurance despite legal requirements.
Digital checks for police and tolls
The Supreme Court has also directed that state police forces should be equipped with handheld devices or mobile applications linked directly to the VAHAN and IIB databases. This will allow officers to instantly verify insurance status during roadside inspections and issue e-challans wherever necessary.
To improve traffic movement on highways, the court has further recommended pilot projects using ANPR technology at selected toll plazas. The objective is to eliminate unnecessary vehicle stoppages and allow seamless movement while digitally identifying vehicles.
Better protection for road users
The court stressed that third-party insurance primarily protects victims of road accidents rather than vehicle owners. In cases where uninsured vehicles cause accidents, injured persons or families of deceased victims often spend years seeking compensation through courts, particularly when the family's sole earning member is killed or permanently disabled.
The Bench has also directed IRDAI to introduce more flexible insurance products, allowing private vehicle owners to choose from:
- Basic third-party cover.
- Personal accident cover.
- Own-damage policies.
- Additional add-on insurance options based on individual needs.
The proposed reforms are expected to strengthen insurance compliance, improve road safety enforcement and ensure faster financial relief for accident victims while making India's vehicle insurance system more technology-driven.
