Longer Motor Insurance Cover May Not Fix Uninsured Vehicle Problem, Says Acko’s Varun Dua

The Supreme Court (SC) has directed that third-party insurance for new cars be purchased for four years and for new two-wheelers for six years, extending the existing tenure by one year in each case.

The move is aimed at tackling the large number of uninsured vehicles on Indian roads. The Court has also asked the Insurance Regulatory and Development Authority of India (Irdai) to issue the necessary directions.

However, Varun Dua, founder and CEO of Acko, has questioned whether making the cover longer will address the real problem. In a recent post on LinkedIn, he argued that the bigger challenge is not buying insurance when a vehicle is new, but keeping the cover active once the initial long-term policy expires.

Why Longer Cover May Create A Renewal Gap

A similar change was introduced in 2018, when new cars were required to carry three-year third-party insurance and new two-wheelers five-year cover.

The complication is that third-party and own-damage insurance can run on different timelines. A vehicle owner may have long-term third-party protection while the own-damage portion, which pays for damage to the insured vehicle, may need renewal after a year.

Dua, citing Insurance Information Bureau data, said most long-term motor policies follow this split structure. This can leave a policyholder with a valid third-party policy but no own-damage cover if the annual portion is not renewed.

For consumers, that distinction matters. Third-party insurance pays for liabilities arising from injury, death or property damage caused to others. It does not pay for repairs to the policyholder’s own vehicle.

Will A Longer Tenure Solve Non-Renewal?

Dua’s central argument is that extending the compulsory period may postpone the renewal problem rather than solve it. A buyer remains insured for longer at the start, but the risk of the policy lapsing can return once that period ends.

He also pointed to differences in renewal behaviour between cars and two-wheelers, arguing that enforcement should focus more sharply on vehicles that drop out of the insurance system after the mandatory period.

Incidentally, the SC has separately pushed for technology-led enforcement, including a pilot under which vehicles without valid third-party insurance could be denied fuel. Such steps directly target uninsured vehicles already on the road.

Pricing And Consumer Choice Also Matter

Longer policies also raise questions over pricing. The premium is collected upfront while claim costs can rise over several years. Dua noted that injury and death claim payouts have been increasing, which can make long-term pricing more difficult for insurers.

For buyers, the takeaway is simple: do not assume that a long-term motor policy means every part of the insurance remains active for the same period. Check the expiry dates for third-party and own-damage cover separately, and understand the renewal, transfer and refund conditions.

FAQs

How long will third-party insurance be required for new vehicles?
New cars will need four-year third-party cover, while new two-wheelers will require six-year cover.

Does long-term third-party insurance also cover damage to your own vehicle?
No. Own-damage cover is separate and may need to be renewed annually even when third-party insurance remains valid.

Why has Acko’s Varun Dua questioned the longer insurance tenure?
He argues that the bigger issue is renewal after the mandatory cover expires, and extending the tenure may only delay the problem.