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Supreme Court advises IRDAI to standardise cross-border Motor Insurance clauses
Jul-22-2026

The Supreme Court has 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 apex court said the language adopted in the policy should be clear and unambiguous, and every policy, if it is meant to cover any extra-territorial jurisdiction, must be clearly mentioned. A bench of Justices Sanjay Karol and N Kotiswar Singh observed it appeared that there is no clear statute or binding precedent or regulatory clarification in force which clarifies the extension of insurance policies for cross-border travel. It noted that this uncertainty causes hurdles in deciding motor accident claims timely and efficiently, thereby affecting the claimants the most.

The top court passed the order on an appeal filed by an insurance firm challenging a February last year order of the Chhattisgarh High Court which had held the company liable to pay compensation of Rs 32.67 lakh to the kin of a man who died in a road accident in Nepal. The bench noted that a bus, which was bound from Durg to certain destinations in Nepal for a religious tour, had suffered a collision with a hill resulting in death of three persons including the driver in 2010.

The apex court said the Inter-Country Transport Vehicles Rules, 2021, now provide a structured legal framework for Indian vehicles to travel to other countries under valid inter-country permits. The bench said the root cause of this issue is the language of the policy and the manner in which these standard-form contracts are drafted by the insurers. The bench said insurers have, in many cases, exploited this ambiguity either to escape liability which they should rightfully bear, or conversely, found themselves burdened with the liability they never intended to assume simply because their policy language was 'sloppy'. It suggested that if cross-border coverage is excluded, the policy must say so explicitly and must inform the insured of the need to obtain separate endorsement before travelling inter-country.

It further said 'IRDAI is advised to consider issuing a master circular standardising cross-border coverage clauses across all motor insurance policies'. The bench also observed that in certain cases that have come up before it, including the present one, the tone, tenor and extent of the orders passed by the concerned tribunals has caused it 'considerable disturbance'. In this case for example, the tribunal elaborately recorded the submissions and evidence. However, its correlation with the facts of the case and effect of this correlation on the end result was lacking.

It said motor accident claims tribunals are bodies that people approach seeking compensation as a consequence of either accidents or deaths, both being entirely unwelcome scenarios. Then, it is only to be expected of the tribunals that whatever their conclusion be, the same must be supported by adequate and clear reasoning. The bench said it is a matter of reality that at least one of the parties to such a dispute takes the matter in appeal to a higher forum. Dealing with the appeal, the bench noted that the insurance firm ought to have expressly mentioned that their policy would not cover any area outside the territory of India even with a permit.
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