The Under-Penetration of Motor Insurance in India and Its Impact

India’s automobile sector is expanding at an unprecedented pace. Industry data suggests that in FY23, more than 15.8 million two-wheelers and 3.8 million cars were sold, positioning India as the world’s second-largest two-wheeler market. Despite this tremendous growth, over half of the vehicles on Indian roads remain uninsured. This under-penetration of motor insurance poses significant risks — not just for individual vehicle owners, but for society as a whole.

Why Do Vehicle Owners Reluctantly Skip Insurance?

For many vehicle owners in India, comprehensive motor insurance is seen as an avoidable expense. Instead, they opt for third-party insurance, the minimum coverage required by law, as it is the cheapest available option. While it helps meet traffic compliance, this limited coverage leaves vehicle owners exposed to the financial strain of accidents, theft, or other damage.

This trend of under-insurance is widespread, with over 50% of vehicles lacking adequate coverage, according to data from the Road Transport and Highways Ministry. The consequences of this aren’t confined to personal financial losses — it has far-reaching effects on society.

The Financial Implications of Under-Insurance

Vehicle owners who avoid comprehensive insurance may believe they are saving money, but in reality, they are risking far greater financial loss. Road accidents in India are frequent, and the cost of repairing or replacing an uninsured vehicle can be overwhelming. As per the Insurance Information Bureau of India, in FY 2019-20 alone, insurance companies paid ₹19,464 crore in own-damage (OD) claims, with the average payout being ₹6,000 for two-wheelers and ₹25,633 for cars. Without insurance, these costs fall entirely on the vehicle owner.

Vehicle theft is another major concern, with over 1 lakh theft claims reported in FY 18-19 and FY 19-20. Owners of uninsured vehicles who fall victim to theft have little recourse, often facing severe financial distress.

Health and Economic Implications

Beyond financial losses, uninsured accidents can lead to serious health and economic challenges. According to a report by the World Bank, India saw 4.5 lakh road accidents in 2022, with the average hospital stay for injured victims lasting nearly 9 days. For families without insurance, medical expenses can be a heavy burden. In the case of elderly victims, these costs can escalate to ₹57,663, placing them and their families in significant financial jeopardy.

The ripple effect of uninsured accidents impacts not just the individuals involved but also strains public healthcare systems and social resources.

The Role of Thought Leaders in Driving Awareness

Thought leaders can significantly influence public perception and drive change in addressing the under-penetration of motor insurance in India. By leveraging their platforms, they can correct misconceptions, such as the belief that comprehensive insurance is an unnecessary expense, and highlight its importance for long-term financial security, especially in a high-risk environment like India. Additionally, they can foster collaboration between insurers, policymakers, and consumers to promote policies that encourage wider adoption of comprehensive coverage. Their advocacy can help shift motor insurance from being viewed as a personal expense to a social responsibility, protecting both individuals and the broader community.

At PhonePe, we are focused on addressing these key challenges that prevent vehicle owners from getting proper insurance coverage. Here’s how we stand out:

Partnering with 17+ Leading Insurers: We collaborate with the most trusted insurance providers in the industry, offering our users a wide range of comprehensive coverage options with no hidden terms or fine print.

Cashless Claims at 10,500+ Network Garages: PhonePe ensures that users have peace of mind by offering cashless repairs at over 10,500 network garages across India. With this extensive network, you can get your vehicle repaired without paying upfront, streamlining the claim process and reducing financial stress. Just ride into any partnered garage, and the repairs will be handled directly between the garage and your insurer—hassle-free!

A Transparent Application Process: Our platform is designed for transparency, ensuring that users fully understand their insurance policies before making a decision. There are no hidden clauses or confusing terms—everything is clearly laid out.

A Seamless Digital Experience: We have made buying insurance easier than ever. Through PhonePe’s user-friendly digital platform, vehicle owners can explore, compare, and purchase insurance policies with just a few clicks. No need for paperwork, in-person visits, or complicated forms. It’s all done online, saving time and simplifying the process.

By offering an intuitive digital experience, one can eliminate the complexities and barriers that often discourage vehicle owners from securing adequate coverage. From the comfort of their smartphones, users can access a variety of plans, ensuring they find the one that best fits their needs.

The Way Forward: Encouraging Comprehensive Coverage

The under-penetration of motor insurance in India is not just an individual concern—it’s a societal issue that demands immediate attention. The costs of uninsured vehicles, both financial and health-related, are too high to ignore. With the rise in vehicle ownership, the need for comprehensive coverage has never been more urgent.

At PhonePe, we are committed to simplifying the insurance process and making it more transparent, accessible, and user-friendly. By doing so, we aim to drive widespread adoption of comprehensive motor insurance, protecting vehicle owners and society at large.