SC's motor TP direction may raise insurer commissions, consumer costs

The Supreme Court's proposed longer mandatory cover could raise upfront costs and insurer commission pressure, while doing little to address uninsured commercial vehicles

The Supreme Court’s directions on Motor Third Party (TP) insurance may raise upfront costs for consumers and commission pressure for motor insurers, according to industry experts. The move may have a limited impact on underinsurance, as commercial vehicles, which account for a major share of uninsured vehicles, are not covered by the direction.

 

In its recent judgment, the Supreme Court directed the insurance regulator to examine increasing the mandatory Motor TP insurance tenure to four years for four-wheelers from the existing three years and to six years for two-wheelers from the existing five years. It also proposed a pilot project to deny fuel to uninsured vehicles at petrol pumps to improve insurance penetration and premium growth.

 

“While the Supreme Court ruling is good, commercial vehicles contribute to more than 60 per cent of TP claims, but there is no decision on that front. Also, business lies with the dealership today and the commissions are very high there,” said Animesh Das, managing director and chief executive officer, ACKO General Insurance.

 

Consumers are likely to face higher costs as leverage will remain with dealership channels, which may charge higher commissions because customers are locked in for a longer period, Das said.

 

“Increasing mandatory tenure may not materially improve overall insurance coverage. The real insurance gap is among older vehicles, where customers are more likely to remain uninsured. It can be resolved only by making insurance more affordable, reducing excessive commission costs, improving customer awareness and making the claims experience easier,” he said.

 

According to Acko, renewal among two-wheelers drops sharply after the existing five-year mandatory policy, with only around 20-21 per cent of customers renewing in the sixth year. This has contributed to older vehicles remaining uninsured, as customers have little recall of renewing their insurance after the initial mandatory period.

 

Industry estimates suggest consumers could see an additional upfront cost of around ₹800-₹1,000 for two-wheelers and ₹4,000-₹5,000 for private cars. The share of uninsured private cars is estimated at around 20-25 per cent, compared with 65 per cent for two-wheelers and around 40 per cent for commercial vehicles.

 

“Overall, the extension in tenure is positive for the insurance industry — it should improve coverage and provide insurers with an additional year of premium upfront, while having a limited impact on commissions and loss ratios. The main implication will be the higher upfront cost for customers and a marginal increase in third-party exposure, which might not act as a deterrent for vehicle purchase,” said a motor insurance expert from a private insurance company.

 

According to General Insurance Council data, motor premiums collected rose 14 per cent year-on-year (Y-o-Y) to ₹26,425.68 crore as of June 2026. Of this, Motor TP premium rose 12.5 per cent Y-o-Y to ₹15,419.12 crore.

 

Industry experts believe the move could boost insurance penetration and coverage, leading to higher Motor TP premium growth.

 

Das said the increase in Motor TP tenure might result in a marginal increase in premiums for the industry, while effective implementation of the proposal to deny fuel to uninsured vehicles could potentially improve insurance penetration and adoption.

 

Paras Pasricha, business head - motor insurance at Policybazaar, said improving awareness around the importance of maintaining valid motor insurance was equally important. “Measures such as linking fuel purchases to insurance verification can act as both an effective enforcement tool and a reminder to keep policies active,” he said.