With reference to motor vehicle insurance and cross-border transport in India, consider the following statements: 1. The Inter-Country Transport Vehicles Rules, 2021 provide the legal framework for Indian vehicles traveling abroad under valid permits. 2. The Supreme Court has ruled that if an insurance policy term is open to multiple interpretations, courts must adopt the interpretation that advances the beneficial object of the Motor Vehicles Act, 1988. Which of the statements given above is/are correct?

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21 July 2026

Supreme Court criticises insurance companies over ambiguous policy wording

The Supreme Court's directives to IRDAI and criticisms of Motor Accident Claims Tribunals (MACTs) highlight key issues in regulatory oversight and tribunal functioning under GS2.

Notes

The Supreme Court criticized insurance companies for using 'ambiguous' and 'sloppy' terms in standard-form contracts to evade legitimate liabilities, resulting in hardships for policyholders.
In an appeal by Oriental Insurance Company against a Chhattisgarh High Court order awarding ₹32.67 lakh compensation for a motor accident in Nepal, the SC ruled that exclusion of cross-border coverage must be expressly stated in the policy.
The court laid down that where policy terms are open to multiple interpretations, judicial bodies must adopt the interpretation that best advances the beneficial object of the Motor Vehicles Act, 1988.
The SC highlighted a regulatory vacuum, noting that while the Inter-Country Transport Vehicles Rules, 2021 provide a legal framework for vehicles traveling abroad under valid permits, they do not clarify whether domestic insurance policies extend to cross-border operation.
To resolve this uncertainty, the SC advised the Insurance Regulatory and Development Authority of India (IRDAI) to consider issuing a master circular standardising cross-border coverage clauses across all motor insurance policies.
The SC also expressed serious concern regarding the functioning of Motor Accident Claims Tribunals (MACTs), observing that many tribunal orders lack adequate and clear reasoning, contributing to delayed claim disposals and an increase in appeals.

Questions

Ambiguous drafting in standard-form insurance contracts often leads to prolonged litigation and distress for policyholders. In light of recent judicial observations, discuss the need for regulatory standardization and consumer protection in the insurance sector. 150 words

Attempt this — 150 words in 8 min

0 / 150 words 8:00
Motor Accident Claims Tribunals (MACTs) were established to ensure speedy justice to accident victims, yet procedural delays and unreasoned orders continue to hamper their effectiveness. Examine the key challenges in the working of MACTs and suggest measures to improve their efficiency. 250 words

Attempt this — 250 words in 11 min

0 / 250 words 11:00

Prelims

With reference to motor vehicle insurance and cross-border transport in India, consider the following statements: 1. The Inter-Country Transport Vehicles Rules, 2021 provide the legal framework for Indian vehicles traveling abroad under valid permits. 2. The Supreme Court has ruled that if an insurance policy term is open to multiple interpretations, courts must adopt the interpretation that advances the beneficial object of the Motor Vehicles Act, 1988. Which of the statements given above is/are correct?

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Insurance firms using ‘ambiguous’, ‘sloppy’ terms to evade liability: SC