Third-party motor insurance is intended to cover damages caused by one’s vehicle in road accidents. However, many vehicle owners lack a clear understanding of the policy’s limitations and requirements. Bikash Choudhary, CEO of FatakSecure, elucidates that this insurance covers legal liabilities for injuries or property damage inflicted on third parties, but does not extend to damages to the insured’s own vehicle or personal injury.

The insurance is often acquired solely to comply with legal mandates rather than as a means of financial protection. Many consumers regard it as a necessary line item to avert penalties rather than a valuable product. This misconception can lead to situations where car owners are unaware of the documentation necessary for filing claims or may choose to resolve minor accidents informally without utilising their insurance.

Saurabh Vijayvergia, Founder and CEO of CoverSure, emphasises that this widespread lack of understanding often becomes evident only when an accident occurs. Consumers tend to assume that ‘insurance’ affords them complete protection, while, in reality, it protects others from potential losses incurred due to their actions.

Claims Stuck in the Legal System

Upon filing a compensation claim following an accident, the matter transfers from the insurance company to the Motor Accident Claims Tribunals (MACTs), which handle such cases. The entire process can become cumbersome and lengthy, as it involves filing a First Information Report (FIR), a step that poses its own challenges, especially in areas with limited awareness or accessibility.

Choudhary explains that while the theoretical framework for claims processing appears straightforward, the reality is mired in complexity, often involving extensive legal proceedings that amplify the time taken for resolution. Claims associated with severe injuries or fatalities witness particularly protracted timelines due to the complexities of assigning a monetary value to human life.

Currently, there are over 10 lakh cases pending before MACTs, indicating a systemic issue rather than sporadic delays. For families facing significant loss or financial distress due to the delay in compensation, the gap between entitlement and payout carries severe consequences.

Financial Implications of Pending Claims

The estimated value of unresolved claims in the MACT system totals over Rs 96,000 crore, primarily involving cases centred around death and severe injuries. Given that compensation amounts are determined based on lost income and future earning potential, individual awards can reach substantial figures, further complicating the resolution of these claims.

Despite the backlog, new claims continue to emerge annually, exacerbating the existing challenges. The structure of the current system does not seem to indicate a shortage of funds, as the premiums for third-party motor insurance exceeded Rs 58,000 crore in FY25, with the claims ratio indicating substantial payouts by insurers. This suggests that the delays are not due to financial constraints.

Many claimants navigate a landscape complicated by informal intermediaries who assist with the claims process and, in some instances, take a significant portion of the final settlement. Rajendra Upadhyay, Chief Growth Officer at Choice Insurance Broking, highlights that until the speed of processing improves through enhancements in documentation and coordination between stakeholders, families will continue to struggle with these financial pressures.

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