Third-party motor insurance is meant to pay for the damage caused in road accidents. In practice, that payment is taking years to come through, with lakhs of claims stuck in the legal system.
More than 10 lakh cases are currently pending before Motor Accident Claims Tribunals (MACTs), specialised courts that handle accident compensation claims, across the country.
For many families, the wait for compensation stretches from three to five years. In some cases, it takes even longer.
This is the reality of third-party motor insurance in the country, a product every vehicle owner is legally required to buy but one that often struggles to deliver support when it is needed most.
In the fourth story in our series Motor Mess, which looks at issues in motor insurance, we spoke to industry experts to understand why claims take years to settle and what is slowing the system down.
WHAT IS THIRD-PARTY MOTOR INSURANCE?
Third-party motor insurance covers the damage your vehicle causes to others. But what the policy actually does – and does not do – is far less understood.
“Third-party motor insurance covers your legal liability towards injury, death, or property damage caused to a third party. It does not cover damage to your own vehicle, your own injuries, or theft,” said Bikash Choudhary, CEO of FatakSecure, an insurance distribution and risk advisory platform.
For bodily injury or death, the liability is effectively unlimited as determined by tribunals, which is one reason such claims often involve legal scrutiny.
That distinction is where confusion begins.
Choudhary said that in India, third-party insurance is often bought to meet regulatory requirements rather than as a financial safeguard.
“While the benefits of third-party insurance are immense, for most consumers, it is a line item needed to avoid traffic penalties, not a product they value,” Choudhary told IndiaToday.in.
He added that many private car owners do not even know how to file a third-party claim or what documents are required, and in minor accidents often end up settling disputes informally instead of using insurance.
As a result, many buyers do not fully understand what is covered and what is not.
“Customers hear ‘insurance’ and assume protection. But this product protects others from you, not you from loss,” said Saurabh Vijayvergia, Founder and CEO of CoverSure, a digital insurance platform.
Vijayvergia said the system is designed to enable transactions, not necessarily to ensure that customers fully understand the product, which is why this confusion persists.
That confusion often becomes clear only when an accident happens.
LAKHS OF CLAIMS STUCK IN LIMBO
When a compensation claim is filed after an accident, the process moves out of the insurer’s hands and into the legal system.
Unlike own-damage claims, which are handled directly by insurers, third-party claims are decided by MACTs. The process typically begins with filing a First Information Report (FIR), a step that can itself be a barrier, particularly where awareness or access is limited.
“On paper, the framework is clear. In reality, it is still process-heavy, involves FIR, legal involvement, and time,” said Choudhary.
He added that once a claim enters the legal process, timelines can stretch significantly.
“Third-party claims can be very long-tailed, especially in cases involving death or serious injury, because assigning a financial value to human life is inherently complex,” he said.
With over 10 lakh cases pending, the delays are structural rather than a one-off. For families that lose a primary earner or face serious injury, the gap between entitlement and payout can translate into immediate financial stress.
While the law provides two routes for compensation, neither eliminates delay.
Rajendra Upadhyay, Chief Growth Officer at Choice Insurance Broking, said that under the no-fault route, fixed compensation is awarded without the need to prove negligence, allowing for faster relief. Under the fault-based route, compensation is linked to the extent of loss but requires establishing liability, a process that can take years.
He added that while the no-fault route offers speed, the fault-based route often becomes necessary in serious cases where compensation depends on income, future earning potential and financial loss.
“The system works, but it is not frictionless,” said Choudhary.
He added that part of this complexity lies in the nature of such claims, where assigning a financial value to human life and future income is not straightforward.
For claimants, this becomes a trade-off between speed and adequacy.
CLAIMS WORTH THOUSANDS OF CRORES PENDING
Vijayvergia said that pending MACT claims are estimated to be worth over Rs 96,000 crore, with more than 10 lakh cases yet to be resolved.
“These are largely claims involving death and serious injury,” he said.
Compensation in such cases is calculated based on lost income, future earning potential, and the needs of dependents. Individual awards can run into tens of lakhs, pushing the aggregate value of pending claims higher.
At the same time, new claims continue to be reported every year, adding to the system even as existing cases move slowly through it.
WHAT’S BEHIND THE DELAY?
One assumption is that these delays are because the system does not have enough money. Data suggests otherwise.
Third-party motor insurance premiums crossed Rs 58,000 crore in FY25, according to data from the General Insurance Council. Claims ratios were close to 88%, which means insurers are paying out most of what they collect.
Another way to test this is to examine whether the system is unevenly priced across vehicle segments, with some groups effectively subsidising others.
Choudhary said there is limited evidence of significant cross-subsidy across segments. Cross-subsidy, in this context, means one group of vehicle owners effectively paying for the claims of another.
That does not appear to be happening in any meaningful way. Private car owners broadly pay in line with the claims they generate. Commercial vehicles contribute slightly more, while two-wheelers appear to be somewhat underpriced.
Taken together, this suggests the delays are not driven by a lack of funds or major pricing distortions. In other words, the system is not short of money. It is slow in delivering it.
“Third-party claims can be very long-tailed when a claim enters the legal process and timelines stretch,” Choudhary said.
DELAYS LEAD TO BIGGER PROBLEMS
Vijayvergia said delays in the system have led to the rise of informal intermediaries.
These intermediaries assist claimants with documentation, filings, and court procedures, often taking a share of the final compensation. In some cases, this can be as high as 20% to 40%. This effectively reduces the compensation that victims eventually receive.
What this essentially means that families already dealing with loss or injury have to shell out more money to get their claim approved.
Another important point is that while the right to compensation exists, not many people have the ability to access it.
For accident victims, this makes the system feel slow and difficult to navigate. For policyholders, the value of the product remains distant and largely invisible.
“It does its job for victims but for customers, the value feels invisible unless something goes wrong,” said Choudhary.
This disconnect feeds one of the most persistent misconceptions in motor insurance. “It is the bare minimum required by law, not a complete protection solution,” he added.
“If third-party claims settle faster, with less legal friction and more digital integration, the entire perception of the product will change,” Choudhary said.
Upadhyay added that faster reporting, documentation and coordination between police, hospitals and insurers could significantly improve how quickly claims are processed.
EFFICIENT, ONLY ON PAPER
At its core, third-party motor insurance is designed to ensure that accident victims are compensated without being left to fend for themselves.
But the effectiveness of that promise depends on how quickly compensation is delivered, not just whether it is awarded.
In India, that delivery is tied to a process that runs through FIRs, legal filings and tribunal-led assessment of liability, injury and financial loss. That makes the system inherently slow.
For victims, this turns compensation into a delayed outcome rather than immediate support.
“The compensation mechanism exists on paper. Its delivery, in practice, is slow, complex and often inaccessible to the people who need it most,” Vijayvergia said.
Even when liability is clear, claims can take years to resolve. For families that lose a primary earner, that delay can mean borrowing, distress sales or long-term financial instability.
“The Motor Vehicles Act was meant to ensure speedy compensation. A process that takes three to five years defeats that purpose,” Vijayvergia said.
Until claims move faster, with less legal friction and better coordination between police, hospitals and insurers, third-party motor insurance will continue to function as a legal requirement for vehicle owners and a slow safety net for victims.
– Ends
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