3 weeks ago
Supreme Court rulings may deepen motor insurers' underwriting woes
When you buy a new car or motorbike in India, you also have to buy insurance.
Insurance is money that helps pay for damage when there is an accident.
The Supreme Court, the highest court in India, made two new decisions about this insurance.
First, it said car insurance must last for four years instead of three, and motorbike insurance for six years instead of five.
Second, it said insurance companies should pay more money to families when a homemaker dies, because their work at home has real value.
Insurance companies say these changes will cost them a lot of money.
They say the government has not let them charge higher prices for four years.
They also say many trucks and tractors do not have insurance, so the new rules do not fix the real problem.
Some people think the rules are good because they protect families, but insurers are worried about losing money.
The Supreme Court directed the insurance regulator to extend mandatory motor third-party insurance tenure to four years for new passenger cars and six years for two-wheelers.
A separate Supreme Court judgment recognised the economic value of homemakers' unpaid work, adding a 'Loss of Domestic Care' compensation head based on a ₹30,000 monthly income.
Insurers argue commercial vehicles, which account for more than 50% of third-party claims and have the highest uninsured rates (tractors at 80-85%), remain outside the mandate.
New India Assurance reported a Motor TP underwriting loss of ₹1,297.17 crore in Q1FY27, up from ₹824.58 crore a year earlier.
ICICI Lombard estimates the industry's Motor TP loss ratio could rise 12-15% due to the homemaker judgment, while Motor TP premium rates have not been revised for four consecutive years.
- Who
- The Supreme Court of India issued the rulings; affected parties include motor insurers such as New India Assurance, ACKO General Insurance and ICICI Lombard.
- What
- Two Supreme Court rulings extend mandatory motor third-party insurance tenure for new private vehicles and increase compensation recognising homemakers' unpaid domestic work, deepening insurers' underwriting losses.
- Where
- India
- When
- Recent — the tenure directive was issued on a Tuesday, following the homemaker-compensation judgment last month, with financial impacts reported for Q1FY27.
- Why
- The rulings aim to extend long-term coverage and fairly value homemakers' unpaid work; insurers warn that stagnant premium rates, commercial-vehicle exclusion and higher payouts will worsen losses.
Ruling intent
Insurers' concerns
Commercial vehicles outside the mandate
Ruling intent
Extending mandatory third-party tenure for new private cars and two-wheelers ensures longer continuous cover for those vehicles.
Insurers' concerns
Commercial vehicles drive more than 50% of third-party claims and have the highest uninsured rates (tractors at 80-85%), so excluding them 'has missed the whole point of this ruling.'
Effectiveness of longer tenure
Ruling intent
Longer mandatory tenure keeps new private vehicles covered for more years, improving protection for accident victims.
Insurers' concerns
Longer tenure won't fix renewal drops — only about 21% of two-wheeler owners renew in year six — and pricing motor risk six years ahead 'isn't underwriting, it's a guess.'
Homemaker compensation payouts
Ruling intent
The court recognised the economic value of homemakers' unpaid work, providing fair compensation under a 'Loss of Domestic Care' head.
Insurers' concerns
Insurers estimate this judgment alone could raise the industry's Motor TP loss ratio by 12-15%, on top of four years of frozen premium rates.
Key facts
- Mandatory TP tenure for new passenger cars
- 4 years (up from 3)
- Mandatory TP tenure for two-wheelers
- 6 years (up from 5)
- Commercial vehicles' share of third-party claims
- More than 50%
- Estimated uninsured rate for tractors
- 80-85%
- New India Assurance Motor TP underwriting loss (Q1FY27)
- ₹1,297.17 crore
- New India Assurance Motor TP underwriting loss (year earlier)
- ₹824.58 crore
- Estimated industry Motor TP loss ratio increase
- 12-15%
- 'Loss of Domestic Care' monthly income basis
- ₹30,000
- Years since last Motor TP premium revision
- 4 consecutive years
Quotes
Girija Subramanian
CMD, New India Assurance
“"Based on a preliminary assessment of the impact of this judgement, the Motor TP loss ratio of the industry is expected to increase in the range of 12% to 15%"”
financialexpress.com
“"The Motor Third Party line of business continued to be under pressure as there was no premium increase and the claim inflation pressure is continuing"”
financialexpress.com
Sources
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