The Union Finance Ministry has instructed the Ministry of Road Transport and Highways to consider measures aimed at promoting third-party insurance. These measures include preventing vehicles without insurance from refuelling or using FASTag lanes. Additionally, the ministry has proposed that the driving licences of uninsured vehicle owners not be renewed.

Under the Motor Vehicles Act of 1988, third-party insurance is mandatory for all vehicles. This type of insurance provides compensation for damage caused to a third party in an accident. However, despite the legal requirement, more than half of the vehicles on Indian roads are operating without insurance. Driving without third-party insurance is an offence, punishable by a fine of Rs 2,000, up to three months of imprisonment, or both for a first-time offender. The fine increases to Rs 4,000 for subsequent offences.

The ministry is also exploring proposals that could soon alter vehicle service regulations, linking vehicle-related services with proof of insurance coverage. Additionally, state governments and union territories will receive instructions to ensure strict compliance with these new regulations, as reported by News18.

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The Union Finance Ministry has proposed measures to promote third-party insurance, including restricting uninsured vehicles from refuelling and using FASTag lanes, while also considering linking vehicle services with insurance coverage.

In line with this, the Parliamentary Standing Committee has submitted recommendations to the government regarding the enhancement of third-party insurance coverage. The committee has also advocated for increased data integration, e-challans, and data reporting to individual states to ensure comprehensive monitoring of vehicle registration and insurance status.

According to the Insurance Regulatory and Development Authority of India (IRDAI), only 50% of the estimated 35–40 crore vehicles on Indian roads in 2024 are covered by third-party insurance.

Furthermore, linking insurance verification with FASTag and other digital services could streamline the process, making it more efficient and effective.