The Supreme Court’s most recent nudge to reform the structure of compulsory motor insurance came in its order dated October 30, 2025 in the matter of National Insurance Co Ltd v. Thungala Dhana Laxmi and others. While the case before the Court involved questions of liability in a motor accident claim, the Bench drew attention to persistent structural gaps in the Indian motor-insurance framework and requested the Insurance Regulatory and Development Authority of India (IRDAI) and the General Insurance Council to actively explore a uniform and more inclusive motor-insurance model.

This invitation was not casual. It flowed from nearly two decades of jurisprudence where the Court has been compelled to address an anomaly at the heart of compulsory motor insurance: that those who own vehicles, drive them, or borrow them with permission remain outside the statutory shield if they become victims themselves.

Indian motor insurance law, even after the April 2022 re-enactment of Chapter XI, is built on an indemnity template. The insured is the first party, the insurer the second and third parties are those outside the insured vehicle. The statutory requirement under Section 147 protects only this last category. The Supreme Court in Asha Rani reaffirmed that occupants of the vehicle are not automatically third parties and, therefore, do not fall under compulsory insurance unless future amendments expressly provide.

As a result, when the owner-driver or an authorised borrower meets with an accident, the statutory policy does not respond: one cannot indemnify oneself and an authorised borrower steps into the shoes of the owner and is therefore not a statutory victim. Cases such as Ningamma, Sadanand Mukhi and Ramkhiladi illustrate this lacuna. In every such decision, the Court has expressed discomfort with the harsh consequences the statutory design produces.

It is this structural vacuum that the Supreme Court brought back into focus in Thungala Dhana Laxmi. Although the matter arose in a different factual context, the Bench recognised that India’s statutory third-party regime excludes categories of victims who, in contemporary road-safety reality, are no less vulnerable than pedestrians or other road users. It asked the regulatory bodies to examine whether a uniform policy structure might be developed to ensure better and wider motor insurance protection. The significance of this direction lies not only in what it seeks, but also in what it implies: the Indian statutory framework may need to move beyond its strict indemnity roots and adopt elements of a victim-protection model, at least where insureds themselves or authorised users are concerned.

Comparative law demonstrates that this evolution is neither novel nor impractical. Under the United Kingdom’s Road Traffic Act, the protection afforded to the insured owner or authorised user is expressly statutory. Section 143 of the Road Traffic Act 1988 (as amended) requires insurance against liability for death or bodily injury to “any person caused by, or arising out of, the use of a motor vehicle on a road". This is supplemented by the compulsory insurance requirement in Section 145, under which the policy must insure “such person, persons or classes of persons as may be specified in the policy” against such liabilities. Critically, Section 151 mandates that once a certificate of insurance is issued, the insurer must satisfy judgments obtained against “the persons insured by the policy,” which includes the owner, any permitted driver and those using the vehicle with the permission of the insured. In effect, these provisions ensure that the owner or authorised user, when injured or killed, is treated as a protected victim rather than someone excluded by the indemnity principle.

A similar amendment to Section 147 of the new Chapter XI is both viable and legally coherent. Parliament and the regulator could permit insurers to offer, at a separately specified additional premium, an enhanced statutory cover that treats the insured, the owner-driver or an authorised borrower as if they were third-party victims. This mechanism would leave the indemnity core undisturbed while adding a layer of statutory social protection. It would also reduce litigation arising from the current exclusion of these categories and harmonise India’s regime with best practices in comparable jurisdictions.

There is also a hard commercial logic supporting such reform. A structured, optional statutory extension for owner-drivers and authorised users would open a significant new premium-earning segment for the motor-insurance industry. With India’s rapidly expanding vehicle base, the number of potential buyers for such add-on statutory protection is enormous. For insurers, responding positively to the Supreme Court’s call would not only serve public interest but also create a substantial and sustainable revenue stream. Put simply, the reform is socially desirable, doctrinally sound and commercially lucrative. Insurers would fill their coffers with premium inflows tied to real consumer need, while offering coverage that is neither gratuitous nor cross-subsidised, but actuarially priced and regulatorily supervised.

Seen in this light, the Supreme Court’s order in Thungala Dhana Laxmi is less a passing observation and more a policy signal. It acknowledges that the Indian motor insurance system has outgrown the indemnity-only mindset and now requires a hybrid approach that treats certain categories of insureds as protected victims. If IRDAI and the General Insurance Council act on this direction, India could take the long-overdue step of ensuring that not only strangers on the road but also occupants, borrowers and owners are meaningfully covered when tragedy strikes. It is time for the law to catch up with the road and for the statutory promise of protection to extend to everyone who truly needs it.

Narasimhan Vijayaraghavan is an advocate practicing before the Madras High Court.