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Supreme Court decision on motor insurance claims to speed up payouts

Currently, insurance companies, when they are supposed to pay a claim, either deposit the sum with the tribunal, or in some small percentage of cases, transfer it to the accounts of the claimants if directed by the tribunal in the award.

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When the claim is filed, the insurer appoints a surveyor to assess the damages and verify the estimated cost of repairs. Once the verification is completed, the insurer settles the claim.

The Supreme Court decision on Tuesday asking courts and tribunals to direct insurance companies to transfer motor accident claim amounts directly to the claimants’ bank accounts is expected to expedite payment of claim amounts, insurance officials said.

“The general practice followed by the insurance companies, where the compensation is not disputed, is to deposit the same before the tribunal. Instead of following that process, a direction can always be issued to transfer the amount into the bank account(s) of the claimant(s) with intimation to the tribunal,” the SC said on Tuesday.

Ashwani Dhanawat, Executive Director & Chief Investment Officer, Shriram General Insurance, said, “Any effort to expedite the settlement of claims is highly appreciated. We commend the Supreme Court’s directives aimed at streamlining the claims process, specifically its mandate for insurance companies to deposit motor claims directly into claimants’ bank accounts, ensuring timely compensation.”

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“We are deeply committed to providing claimants with prompt and seamless settlements. As of FY 24-25, 20 per cent of the claim amount has been directly paid to claimants, while 80 per cent has been disbursed to the tribunal. We recognize that delays in the claims process can be frustrating for claimants, and as such, we continue to focus on accelerating the settlement process, ensuring it is both efficient and hassle-free. Our ultimate goal is to ensure that claimants receive the compensation they are entitled to, without unnecessary delays,” Dhanawat said.

Currently, insurance companies, when they are supposed to pay a claim, either deposit the sum with the tribunal, or in some small percentage of cases, transfer it to the accounts of the claimants if directed by the tribunal in the award.

As of 2022-23, 10,46,163 claim cases were pending throughout the country before the tribunals.

According to the General Insurance Council, insurance companies reported a gross premium income of Rs 89,405 crore during the 11 months ended February 2025. Of this, motor third party premium income was Rs 52,818 crore. Motor TP policy has a provision for unlimited liability and compensation for most accident cases. They are invariably decided by the courts which are liberal in fixing the claim pay-outs.

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Third-party insurance is a statutory requirement for all vehicle owners as per the Motor Vehicle Act. It is a type of insurance cover where the insurer offers protection against damage to the third-party vehicle, personal property and physical injury. The policy does not provide any coverage to the insurer.

If a policyholder meets with an accident, then the insurer offers financial assistance to pay for the cost of repairs to the third-party property. Thus, it reduces the financial burden for the policyholder. In the event of an accident, the insured must inform the insurance company about it immediately before filing for a claim.

When the claim is filed, the insurer appoints a surveyor to assess the damages and verify the estimated cost of repairs. Once the verification is completed, the insurer settles the claim.