Indian insurers brace for higher motor third-party claims following Supreme Court rulings on domestic work valuation and broader liability scope

Recent Supreme Court decisions in India are prompting insurers to increase reserves as they face potentially higher liabilities for motor accident claims, including compensation for domestic work and claims by family members of policyholders.

General insurers in India are likely to set aside more money for motor third-party claims after a run of Supreme Court rulings that have lifted compensation for accident victims and widened the interpretation of what can be claimed. The pressure is expected to hit profitability first, before working its way through reserves as courts and tribunals begin to apply the new reasoning more broadly.

At the centre of the change is the Supreme Court’s June ruling in Shishu Pal v. Surjeet, which acknowledged the economic value of unpaid domestic work and introduced a separate compensation head for the loss of domestic care. The court fixed a notional monthly income of ₹30,000 for homemakers in cases where no paid income can be proved, pushing total compensation sharply higher in the case before it.

Insurers now estimate that motor third-party claim outgo could rise by 3% to 4% initially, with the impact potentially reaching 10% to 12% over the next 12 to 18 months as the interpretation is taken up more widely across the country. That would add to reserve requirements at a time when underwriting margins are already under strain.

The uncertainty does not end there. According to a separate Supreme Court clarification reported by The Times of India, claims under Section 163A of the Motor Vehicles Act are not confined to third-party claims, and family members of a policyholder may also be able to seek compensation after a fatal accident. The court has referred that issue to a larger bench, leaving insurers to prepare for a potentially broader liability landscape.