India has an uninsured-vehicle problem. That much is beyond dispute. Where opinion divides is on what actually fixes it. The Supreme Court's recent order extending mandatory third-party insurance tenure—four years for new cars and six for two-wheelers—answers that question with a longer lock-in. The data available to the industry suggests this will not close the compliance gap. It may well widen it.
Start with what the order gets right. Its enforcement measures—camera-integrated challans and a pilot linking fuel access to valid insurance—target the mechanism of non-compliance directly. These deserve support and, ideally, faster rollout. The tenure extension is a separate question, and worth examining on its own terms.
The renewal gap
India's compliance problem has never really been about first-time purchase. Insurance is mandatory at the point of sale, so almost every new vehicle leaves the dealership covered. The gap opens later, at renewal, once the original paperwork is forgotten and the urgency has faded.
This is where a longer tenure works against its own goal. On the existing five-year long-term two-wheeler cohort, renewal compliance falls to roughly 21% by the sixth year, a drop of nearly 80% from where coverage started, according to the Insurance Information Bureau (IIB) SAMAR Report 2025.
Extending tenure further does not close this gap. It pushes the same failure to a later point in a vehicle's life, when the vehicle is older, harder to trace and even less likely to be renewed.
For cars, the case for extension is harder to make on compliance grounds at all. Renewal behaviour in this segment already runs well above 75%, and in several cohorts above 90%, states the report. This is not the population driving India's uninsured-vehicle numbers.
A longer mandate here adds a fourth year of upfront premium to a segment that was largely already compliant, without touching the segment that isn't insured.
Dealer dilemma
A four-to-six-year policy is also a much bigger, one-time transaction, collected almost entirely through OEM dealerships, at the exact point in the purchase journey where a buyer has the least room to compare or negotiate.
A customer signing a four-year policy at the counter has no easy way to check whether the price quoted is competitive. And once that policy is signed, there is no renewal moment for years, no point at which the customer can walk away, compare or switch.
The customer pays more. The dealer earns more. Nothing in between creates any pressure to stop it.
Irdai reviewed a near-identical long-tenure product in 2020 and found dealerships forcing the sale of these bundled policies onto customers, who were then locked into a single insurer for years with no realistic way to switch, often paying more than an annually renewed policy would have cost. Irdai withdrew the product.
This order revives the same structure, on the same channel, with the same absence of competitive pressure the regulator once found reason enough to act on.
Missing vehicles
More than half of India's third-party claims come from goods carriers, passenger carriers and other commercial vehicles, by the Insurance Information Bureau's own numbers. None of them see any change under this order.
Younger private cars and two-wheelers, the only two categories this order touches, are already the more compliant half of the two. If the underlying goal is reducing the cost of uninsured and under-compensated claims, that is the segment that needed attention first.
Third-party motor insurance in most major markets—the UK, the US, Germany, Canada, the UAE and China—is priced and renewed annually. That is not a regulatory accident. Annual pricing allows risk to be reassessed as conditions change.
A six-year mandatory tenure asks insurers to price risk over a horizon no major market currently uses for this product, a meaningfully different actuarial exercise, and one the industry has not built the infrastructure for at this scale.
Enforce, don't extend
None of this argues against the underlying goal. India should want more insured vehicles on its roads. But the evidence suggests that outcome depends less on how long a policy runs and more on whether renewal is easy to remember, affordable, easy to claim on and enforced when it lapses.
The measures already bundled into this same order—digital enforcement tied to registration and fuel access—do more of that work than tenure length ever will.
The remedy here has outrun the evidence. The renewal and pricing data now available make a strong case for revisiting the tenure question, while retaining and strengthening the enforcement measures the same order got right.
The writer is MD & CEO at ACKO General Insurance Company