History of Motor Insurance and its existence.
• Principles of Insurance and its relevance with Motor Insurance.
Definition and Types of Motor Vehicles
• Case Study: TATA AIG General Insurance Company. -About the company -Products 1. Private Car Insurance. 2. Two-wheeler Insurance. 3. Commercial Vehicle Insurance.
The answer to this question is very simple as it comprises of two words i.e. motor + insurance and motor means a vehicle of any sort which is running on the road and Insurance means to provide cover for any unforeseen risk which may occur in day to day life. Then another question arises what is unforeseen risk? You are walking on the road a car hits you from the back, you get a fracture in your leg and while coming out you never thought that you will have an accident but it happened and this is unforeseen risk i.e. a risk of happening of an event which may happen or may not happen. So Motor Insurance as you all know is the insurance for motor vehicles, there are various risks which are related with the loss of/ or damage to motor vehicles like theft fire or any accidental damage so as to provide coverage for this motor insurance is taken.
History of Motor Insurance:
If we see in real life we can say that Motor Insurance is an important part of General Insurance; it is the fascinating branch of insurance. This type of insurance has come into existence from United Kingdom in the early part of this century. As you must be surprised to know that the first Motorcar was introduced in England in 1894. The first motor policy to provide coverage for third party liability was came into existence in 1895. Third party liability includes third party and liability incurred towards third party. Third Party means any party other then owner /driver or the government, any liability occurring towards third party due to use of motor vehicle is third party liability. It can be in the form of bodily injury to third party or damage to third party property. So at the beginning, only third party insurance came into existence but later on, in U.K they realized the importance of insurance in terms of motor and with this an accidental comprehensive policy also came into existence and later on the lines of U.K. we started using approx the same policy. In 1903 the Car and General Insurance Corporation limited was established mainly to transact motor insurance, after this company a lot many other companies has come into existence to transact this business. It has been realized that after World War I, there was a considerable increase in the number of vehicles on the road and when we have the number of the vehicles on the road there is an increase in the number of accidents. As the concept of insurance was not that much in existence so lot of accidental damages were not at all recovered and the motorists faced a lot of problems for getting their treatments and damages to their vehicles. After realizing this
introduction of compulsory third party insurance through the passing of the Road Traffic Acts 1930 and 1934 was done. Later on these Acts have been consolidated by the Road Traffic Act 1960. How the concept of Motor Insurance has come into existence? In 1939, India has also realized the importance of Motor Insurance and Motor Vehicle Act was passed and came into existence in 1939. Earlier, only few people knew about motor insurance but later on compulsory third party insurance was introduced by the Act on 1st July 1946. We in India follow the same practice as that of U.K.. As Motor Vehicles Act laid the provisions in 1939 and it required some amendments that were implemented by the Motor Vehicles Act 1988 and it became effective from 1st July 1989 and that’s how the insurance concept has come to India. Why one should go for motor insurance? As you all know in our country crores of vehicles are plying on the road and lot of accidents occurred daily, and due to these accidents damages to material and third party occurs. Third party is any person other then the owner. But the question arises how the loss is to be compensated? After realizing all these problems it was made mandatory for all the vehicles which are plying on the road to have an insurance which can provide coverage to general public against the risk of loss or damage to motor vehicles and with this the motor insurance concept has come into existence and Act made this insurance compulsory for everyone those who are driving the vehicle on the road so it become quite popular among people and than
motor insurance policies become available to provide a comprehensive cover and a third party liability cover.
the valid contract must have the essential element of offer and acceptance. Contract of insurance comes in to an existence where there is an offer and the underwriter or proposal of one side and the insurer accepts it by issuing the policy. The competent person may be who is the age of majority according to law and who is of sound mind. Like every other contract the insurance Contract is the sort of contract it is approved by the Indian Contract Act. sound mind and free consent of the parties. The object of the contract should be lawful. Premium is the age consideration that must be given for starting the insurance contract. Contracts of motor insurance are governed by the doctrine of utmost good faith. The contract of insurance must be entering into contract by the competent person in order to be a valid contract. According to section 2(h) and section (10) of Indian Contract Act. Every person entering into an insurance contract should enter into by their free consent. It is one of the important principles of that implies to the contract of
. It has to satisfy all the essential elements of a simple contract.Principles of Insurance & its Relevance with Motor Insurance
• Utmost Good Faith
• Principal of Indemnity
1) Utmost Good Faith: Contract of insurance have all essential elements of nature of general contract. considerations. legal parties.
which vehicle he is using. Any past experience related to loss has to be informed to the insurer. misrepresentation. No important material facts and figures must be concealed. etc i. value and details of driver.e. fire detection etc. nature and its uses. responsibility of disclosure of both parties should be a reciprocal duty i. how good is the driver at driving the vehicle which can be known by his past record. In the context of the principle of utmost good faith. income. family size. Any concealment. occupation.e. Similarly the insured’s duty of utmost good faith is disclosing the scope of insurance at the time of contract.insurance It refers that both the parties involved in insurance contract should make the disclosure of all material facts and figures relating to the subject matter of the insurance contract. Motor Insurance: Type of car. fraud or mistake concerning the material facts to the risk should be disclosed. it is pertinent to note the provisions of Section 149 of the Motor Vehicles Act 1988. This section provides that: it is compulsory to take the insurance policy if a vehicle is plying on the road and if a certificate of insurance is being issued then insurer can not cancel or avoid a third party liability under this policy In other words It means that any one who is driving a vehicle on the road can
. disclosure is absolute and positive. Some of the few examples of disclosure of material facts such as: Life insurance: Age. hilly area or plain area. in which area he will be driving the vehicle i. past loss experience. the driving history and traffic convictions of the driver. If either party does not disclose the utmost good faith the other party may avoid the contract. etc. The insured’s duty to disclose all material facts known to him but unknown to the insurer. Fire insurance: Inflammable materials. health.e. education. Thus.
damage or a potential liability. 2) Insurable Interest: Insurable Interest means the insured must have some legal right to insure the subject matter. According to the definition of insurable interest in the event of the legal right to insure arising out of a financial relationship should be recognized under the law between the insured and the subject matter of insurance. if I own a car I can take a insurance policy on my name but if my friend own a car then can I take a policy on my name? The answer is ‘No’ as we don’t have any right on other’s property and no profit or loss will occur to me if a claim arises to this vehicle. ii) Such property or liability must be the subject matter of insurance.not drive the vehicle without an insurance policy it may be a comprehensive policy or only a third party liability policy. interest or freedom from liability and stands to lose by and loss. Without insurable interest the contract of insurance is void and unenforceable. For e. damage.
. The insured must have an insurable interest in the subject matter of insurance. A person said to have an insurable interest in the subject matter has to have benefit from its existence and prejudice by its destruction. right. insurable interest must be actual and real and not arising out of mere expectation. Thus it is necessary for valid contract of insurance. The essentials of insurable interest are:i) The existence of property exposed to loss. injury or creation of liability. Insurable interest is an important and fundamental principle of insurance. It means that insurable interest must be a pecuniary interest.g. iii) The insured must bear a legal relationship to the subject matter whereby he stands to benefit by the safety of the property. Thus.
A clause included in the policy to protect the financier’s interest.In motor insurance. which is exposed to loss or damage. Indemnity is one of the fundamental principles that except life insurance. Further. the vehicle is the property. According to this principle the assured in the case of loss against the policy made shall be fully indemnified. This clause provides that in respect of loss or damage to the motor vehicle (which loss or damage is not made good by repair or replacement) the monies shall be payable to the owners. personal accident insurance. the financiers. the finance company has an insurable interest in the vehicle until all the installments are repaid. Therefore.V. 3) Principal of Indemnity: Indemnity means to indemnify the loss or to put the insured back in same position as he was before the loss. they are: 1) Subrogation and 2) Contribution.e. under Section 146 of the M. the insured has insurable interest. The word “indemnity” implies that protection. other contracts of insurance such as fire. marine and accident insurance are contracts of indemnity. no person shall allow any other person to use a vehicle in a public place unless the vehicle is covered by an insurance policy complying with the requirements of the Act. There are two corollaries to indemnity. security against damage or loss of security against legal responsibility. which entitles him to insure the vehicle against damage and liability risk. he may suffer financial loss if he insures that liability through third party caused y negligent use of the vehicle.Act 1988. If a vehicle is purchased under a hire purchase agreement. The insured also has a legal liability towards third parties. i.
For e. For e.g. If a vehicle has collided with another vehicle then the loss occurred to vehicle can be claimed from insurer but if it is due to other party and loss has occurred then it will come from other party.000 then the claim will come in proportion from both the insurer’s i.e. the insurers are to share the loss in proportion to the amount assured by each of them.000 from insurer B. This is the one important principle essential for valid insurance contract.e. According to this principle. 200. It is also referred as getting into the shoes of the others.000 from insurer A and Rs.g. Rs 25. It implies that the substitution of the insurer in place of the insured in respect of the latter’s of Subrogation. to fire and marine insurance.. This principle holds good only in the case of motor. 100. Contribution in simple words means to contribute the amount. A loss occurs for 75. If a car is insured by two insurers for Rs.000 from insurer A and for Rs. the case of double insurance. fire & marine insurance.The term ‘Subrogation’ means transfer of all the rights and remedies available to the insured in respect of subject matter to the insured after indemnity has been affected. It does not mean that if loss occurs and if a person has double insurance then he can claim the whole amount from both
. which means insurer may give the claim to you but they can get the amount of loss from the other party. This doctrine of contribution also applies only to contracts of indemnity i. 50.000 from insurer B. In order to apply the right to contribution between two or more companies the following factors must exist: 1(a) The subject matter of insurance must be the same 2(b) The event insured must be the same 3(c) The insured must be the same.
It has been defined as “The active efficient cause of that sets in motion a train of events which brings about a result. Insured perils means the perils covered by insurer under the policy. Causa Proxima is necessary for a valid contract of insurance. The doctrine of proximate cause applies to motor insurance as to other classes of insurance.the insurers. this way he can make profit out of these contracts. 4) Proximate cause: it means the actual cause of the loss due to which a loss has occurred. The loss or damage to the vehicle is indemnified only if it is proximately caused by on of the insured perils.
. So for this purpose this contribution corollary has come into existence as insurance contracts are the contracts of indemnity and no body has to make profit out of it. The third party injury or damage must be proximately caused by the negligence of the insured for which he is held legally liable to pay damages. without the intervention of any force started and working actively from a new and independent source”. The doctrine also applies to third party claims.
as also the law commission went into the different aspects of
. when this Motor Vehicles Act has come into existence and properly came in force on 1st July 1939. felt that this law should now take into account also the changes in the road transport technology. The Motor Vehicle Act. control of traffic etc. registration of motor vehicles. It was long time back in 1939. maintenance and operation of motor vehicles. Low powered Two-wheelers Committee. Under this Act Chapter VII. however. pattern of passenger and freight movements. Road Safety committee. national Police Commission. But this did not include all the provisions where as Chapter VIII was brought in force on 1st July 1946. 4 of 1939) consolidated and amended the law relating to motor vehicles. development of road network and particularly the improved techniques in motor vehicles management. 1939 (No. construction equipment and maintenance of motor vehicles. Various Committees like the National Transport policy committee. If we see the provisions of this we will realize that it provides for various matters relating to the use.A and Chapter VIII of the Act provides for insurance of motor vehicles against third party risks. This was amended a several times to keep it up to date.Motor Vehicles Act
The Motor vehicles Act 1939: Motor Vehicles Act in actual sense came into existence in 1939. A need was. Besides this it also take into consideration the matters relating to licensing of drivers of motor vehicles.
Therefore a working group was constituted in January 1984 to review the provisions of the Motor Vehicles Act. e) Provisions for issuing fitness certificates of vehicles also by the authorized testing stations.
rationalization of this law. 1988 (Act No.road
. It has recommended removal of certain disparities with regard to the liability of the insurer to pay compensation depending upon the class or type of vehicle involved in the accident The Motor Vehicles Act. 1988: The Motor Vehicles Act. 1939 and to submit draft proposals for suitable legislation to replace the existing Act. d) Standards for anti-pollution control devices. In 1985 General Insurance Corporation has appointed a Committee of experts. c) Laying down of standards for the components and parts of motor vehicles. which examined the provisions of the 1939 Act thoroughly and submitted to the Central Government an exhaustive report suggesting constructive amendments to the Act. 59 of 1988) is the outcome of the recommendations proposed by various Committees. It has replaced the earlier 1939 Act and it became effective from 1st July 1989. b) Stricter procedures for grant of driving license and period of their validity.
updating. Some of the more important provisions of the Act provide for the following matters: a) Rationalization of certain definitions with additions of certain new definitions of new types of vehicles.
jointly and severally. owners. k) Seeking to provide for more deterrent punishment in cases of certain offences. i) Maintenance of State registers for driving licenses and vehicle registration. This concept is known as No Fault Liability. In fact section 140 (3) specifically provides when the claimants shall not be requires to plead and establish that the death or permanent disablement in respect of which the claim has been made due to any wrongful act. The material change in the law is that the negligence of the owner of the owner or ser of the motor vehicle is no longer relevant to decide the question of liability. or vehicles concerned or any other person. the owner of the vehicle shall. as the case may be. neglect or default of the owner.
. h) Administration of Solarium Fund by General Insurance Corporation. No Fault Liability: Section 140(1) of Motor Vehicles Act. of the vehicle. j) Constitution of Road Safety Councils. 1988 provides as follows: “Where the death or permanent disablement of any person has resulted from an accident arising out of the use of a motor vehicle.f) Enabling provision for updating the system of registration marks. be liable to pay compensation n the respect of such death or disablement in accordance wit the provisions of this section. or. g) Liberalized schemes for grant of All-India Tourist permits as also national permits for goods carriages. the owners of the vehicle shall.
for death and Rs.000/-for permanent disablement. Hit and Run Accidents: Hit and run accident is “an accident arising out of the use of a motor vehicle or motor vehicles the identity whereof cannot be ascertained in spite of reasonable efforts for the purpose.50.” Section 163 provides that the central government may establish in fund known as Solatium Fund to be utilized for paying compensation in respect of death or grievous hurt to persons resulting from Hit and Run Motor accidents.25.However the amount of compensation payable is restricted to Rs. 000/. Permanent disablement is defined as any injury or injuries involving. or privation of any member or joint. (a) Permanent privation of the sight of either eye or the hearing either ear.
. 12.000/. 000/-in the case of permanent disablement to motor vehicle act 1988. or (b) Destruction or permanent impairing of the powers of any member on joint (c) Permanent disfiguration of the head or face. • Permanent Privation of the hearing of either ear. it was Rs. 25. Earlier. It is provided that grievous hurt shall have the same meaning as in the Indian Penal Code. According to section 320 of the Indian Penal Code the following kinds of hurts are designed as grievous: • Permanent Privation of the vision of either eye.in the case of death and Rs.
You must have seen a lot of accidents on road where a vehicle had hit the other vehicle or peddlers on the road. Any hurt which endangers life or which causes the sufferer to be during the space of twenty days in severe bodily pain or unable to follow his ordinary pursuits. and the State Government as decided by the Central government.12.and in respect of ‘grievous hurt’ Rs.
. which is. (Earlier to amendment.8500/. consists of contributions from the General Insurance Industry. 25. 500/-after the amendment to Motor Vehicles Act 1988.• Privation of any member or joint.000/.000/-for grievous hurt. The payment of compensation for Hit and Run Accidents is subject to the condition that if any compensation is awarded for such death or grievous hurt under any other provisions of the Motor Vehicles Act or any other law under Hit and Run Accident has to be deduced from such compensation. The compensation payable form death claims is fixed at Rs. 2. the Central government. so for them this solatium fund is created to provide them compensation. • Fracture or dislocation of a bone or tooth.for death and Rs. A solatium fund is created so as to provide compensation for the victims of hit & run cases. • Permanent disfiguration of the head or face. Solatium fund: It is the fund. it was Rs.
.Types of Motor Vehicles
Definition of Motor Vehicle: In simple words we can say a motor vehicle is that which runs with a motor. but does not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises or a vehicle having less than four wheels fitted with engine capacity of not exceeding 25 cubic centimeters. Types of Motor Vehicles running on the road: There are various motor vehicles plying on the road but for the purposes of insurance. Act 1988 as any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted thereto from an external source and includes a chassis to which a body has not been attached and a trailer. and revised with effect from 1st July 2002. the Indian Motor Tariff. but in technical sense we can define a “Motor Vehicle” as under Section 2 (28) of the M.V. • Motorized Two Wheelers
And Commercial Vehicles. which governs the Motor Insurance business in India. classifies the motor vehicles broadly in 3 categories: • Private Cars.
racing. reliability trial. which also includes motorized rickshaw cabin scooters used for private purposes. These are vehicles used under a Private Carrier’s permit within the meaning of the Motor Vehicles Act 1939. pace making. c) Three Wheeled vehicles. speed testing etc. The Act defines a “private carrier” as “an owner
. It also excludes carriage of goods other than samples. reliability trial. racing. 3) Commercial Vehicles: a) Goods carrying vehicles (own goods): They are trucks and trolleys which carry goods for their own purposes or for their private use. domestic and pleasure purposes and sometimes for professional purposes of the insured or used by the insured’s employees for such purpose It excludes use for hire or reward. Trial. speed testing and used for any purpose in connection with the Motor Trade is excluded. domestic and pleasure purposes and also for professional purposes. It excludes carriage of goods other than samples of the insured or used by the insured’s employees for such purposes but excluding use for hire or reward. b) Motorized three wheeled vehicles (including motorized rickshaws/ cabin body scooters) are used for private purpose only.1) Private Cars: These are: a) Private Car type vehicles are used for social. pace making. speed testing and sue for any purpose in connection with the motor Trade. which is used for social. 2) Two wheelers: Motorized two wheelers can be with or without sidecar.
whether in pursuance of the terms of a contract or agreement or otherwise. as people who were using it for personal use and people those who were using it for business purposes were paying the same premium.
b) Goods carrying vehicles (General Cartage): These are vehicles used under a Public Carrier’s permit within the meaning of the Motor Vehicles Act 1939. all goods carrying vehicles are called “Goods Carriage” and they did not categories them into Public carrier and Private carrier. when the tariff was revised in 1. for another person at any time and in any public place for hire or reward. Ltd at Delhi and I have to send my own goods to my manufacturing unit at Meerut so for this purpose if I use my own truck to carry my own goods.2002. For e. After realizing this.C. renamed as Public carrier and Private carrier for rating purpose.
. Motor Tariff Categorized the Goods Carrying Vehicle as ‘Own Goods Carrier’ and ‘General Cartage Carrier’ separately for rating purpose. I own AXC Co.g. T. it means this vehicle is under the category of Private carrier vehicle. The Act defines a ‘public carrier’ as “an owner of a transport vehicle who transports or undertakes to transport goods or any class of goods.” When the Motor Vehicles Act (of 1988) was amended it did not have this category. But this was not the right way to charge premium.7.of a transport vehicle other than a public carrier who uses the vehicle solely for the carriage of goods which are his property or the carriage of goods which belong to him and is necessary for the purpose of business to carry the goods and not being a business of providing transport”.A.
. These Tribunals were introduced with the object of providing facilities for less expensive and quick settlement of third party claims. 1939(as amended). The procedures of this Tribunal is simpler then those of Civil Court. In a way Tribunal has all the powers. which a Civil Court has and it is deemed to be a Civil Court at times but still the procedures of the Tribunal and a Civil Court are different.Lok Adalats and MACT
Introduction to Motor Accidents Claims Tribunal: Under the provisions of the Motor Vehicle Act. MACT is formed so as to provide assistance to general public when any third party claim arises. but still they were unable to settle the various disputes regarding third party damage / injury. Motor Accidents Claims tribunal are constituted by State Government to adjudicate upon claims for compensation in respect of motor vehicles accidents involving death of or bodily injury to persons or damage to their property.
A. There are so many accidents that occur daily and claims arises due to accidents but when the settlement has to be done sometimes insured is not at all satisfied with the compensation provided to him as settlement of claim. Chapter XI of the Lok Nyayalaya rules.T or District and Session Judge. 1986 provide special provisions for the amicable settlement of pending cases before MACT. Ex. If in reality we see there are lot of third party claims are still pending with MACT and to clear this backlog and to provide a proper way for the settlement of claims the concept of Lok Adalat (also known as Lok Nayayalaya-peoples court) was mooted by Shri P. and if it is found that there no defense regarding the negligence of the victim nor any defense under Section 96(2) of the Motor Vehicle Act.Lok Adalats:
Lok Adalats as the name says are the Adalats formed for the general public to settle their disputes regarding claim settlement.C. It has been specified by GIC that Claims up to certain limits from time to time are submitted to the Lok Adalat and only pending cases are taken up for compromise settlement. It is provide that members of MACT themselves should scrutinize each case pending before them. 1988) – which section provide the only grounds of defense open to an issuer – then these matters may placed before the Lok Nyayalaya for amicable settlement.
. Chief justice of India. 1939 section 49(2) of the Motor Vehicle Act.N Bhagwati. If in a general way we see Lok Adalat sections are held at important centers in the country in lose liaison with the Legal Aid Committee of the state and the M.
The three members of the Lok Adalat are drawn from the followings: a) Retired judges of the Supreme Court or High court or District Court or Motor Vehicle as member. for the opposite party and the insurer has to be obtained well in advance for placing the cases before the Lok Nyayalaya. All the parties shall voluntarily agree to place the matter before the Lok Nyayalaya and extend their cooperation to settle the dispute by Lok Nyayalaya and after it will arrive at an agreement by writing on the prescribed form.T matters. c) Senior Advocates having knowledge about M.A.C. A notice has to be made to all the parties to be present in Lok Nyayalaya on the appointed date and time. After this a compromise memo will be submitted to MACT for passing the final order.A consent application has to be taken from the applicant and also the consent of the advocates for the applicants. b) Government pleader.
. etc. Then the insurer will be required to deposit the cheque for the amount decided upon by MACT within four weeks form the date of agreement to settle. d) Principals or professors of law colleges.
lawyer’s fees or any other charges.
. It is a cheapest remedy for the applicant as it does not charge any court fees. etc. This Scheme is particularly applicable to “Non-Fatal” injuries i. 2. 2 or 3 months.Jalad Rahat Yojana: Another Scheme. which is a pre litigation of scheme. If the amount assessed is not acceptable to the claimant. It provides a fair assessment of claims by independent judges. medical practitioners etc. retired insurance executives and medical practitioners. The claims instead of filing a claim before the MACT can submit to the company the relevant claim documents such as copy of FIR. 3. medical certificates. which was formulated. retired judges. proof of age and income. The Jalad Rahat Yojana offers the following benefits as: 1. The settlement is arrived by an independent panel comprising retired judges. Settlement of claim within shortest possible time i. Payment is made in full and final settlement of claims.e. In this if a claim arises then the claimant instead of going to MACT can go straight away to this forum. 4. he has a right to seek redress or help through the MACT. where the death of the person does not occur. by the GIC and the four companies is called Jalad Rahat Yojana.e.
2b) Any local authority. or cause or allow any other person to use. except as a passenger. as the case may be. EXEMPTIONS The provisions relaying to compulsory third party insurance do not apply to any vehicle owned by the Central government or state government and used for Government purposes unconnected with any commercial enterprise. This section embodies the compulsory nature of third party insurance for using a vehicle in a public place. 1991. or meant to carry. there shall also be a policy of insurance under the public liability insurance act. a motor vehicle in a public place. Section 146 seeks to protect members of public traveling in vehicles or using the roads (public place) from the financial liability caused by risks attendant upon the use of motor vehicles on the roads by making third party insurance compulsory for users of motor vehicle. a policy of insurance complying with the requirements of this Chapter (chapter XI) Provided that in case of a vehicle carrying.Necessity for third party insurance and its Exemptions
1 No person shall use. However the government has been given power to grant exemption for any vehicle owned by 1a) The Central government or a state government if the vehicle is used for Government purposes connected with any commercial enterprise. 3c) Any state transport undertaking
. dangerous or hazardous goods. unless there is in force in relation to the use of the vehicle by that person or that other person.
the necessity for Insurance against third party risks and its Exemptions. The fund has to be established in accordance with the Rules framed under the Act. the above exemption is made only if a fund is established and maintained by that authority for meeting any liability arising out of the use of any vehicle.However.
. Summary In the above we have discussed about the Legal Aspects related to Third Party Risks.
of Indian Motor Tariff it is defined as: Motor Insurance in India cannot be transacted outside the preview of the India motor Tariff unless specifically authorized by the TAC. motorized two wheelers and commercial vehicle excluding vehicles running on rails. Under GR. Pakistan.1.General Regulations as Per Indian Motor Tariff
1) Insurance not provided for: It means no Motor insurance business can be transacted without the purview of India Tariff until permission is being taken from TAC. Nepal. It can be extended to provide coverage to include Bangladesh. and Maldives & Sri Lanka. For risks.4. Under General regulations (GR). which have not been provided in the tariff. Motor Insurance includes Private Cars. references should be made to TAC for advice thereon. 2) The extension of Geographical Area: Under Motor Insurance the extension of area is provided to take a motor insurance policy. of Indian Motor Tariff it is defined as: The Geographical Area of Motor Policies may be extended to include a) Bangladesh b) Bhutan c) Nepal d) Pakistán e) Sri Lanka f) Maldives
3) Valued policies: These are the policies under which a sum is agreed upon and policy is taken for that amount.per vehicle.
For such extensions Endorsement IMT –1 is to be used. For such policies. In case of loss that amount is given to the insured. by charging a flat additional premium.as the case may be. than Rs.7. Under GR. irrespective of the class of vehicle. of Indian Motor Tariff it is defined as: Under an agreed value Policy a specified sum agreed as the insured value of the vehicle is paid as compensation in case of Total Loss/ Constructive total Loss of the vehicle without any deduction for depreciation. However specifically exclude cover for damage to the vehicle / injury to its occupants/ TP liability in respect of the vehicle during air passage / sea voyage for the purpose of ferrying the vehicle to the extended geographical Area.per vehicle. 500/. as stated below for the period not exceeding 12 months: For package policy.
. Endorsement IMT – 2 is to be used. For policies other Rs . 100/. irrespective of the class of vehicle. It is not permitted to issue to Agreed Value Policies under this tariff excepting for policies covering vintage cars as defined under above. Such geographical extensions.
Documents related with motor insurance
• Proposal form The proposal form is the basis of insurance. The queries made/details stated in the Proposal form are the minimum requirements to be furnished by a proposer. (iii) Occupation: The answer to this question is important for underwriting private car and commercial vehicle risk and has an important bearing on the moral hazard.
. but it is difficult to get precise answers particularly in respect of persons other than the insured who may drive the car. The questions commonly asked are: (a) Particulars about the proposer:1(i) Proposer’s name in full to establish the identify of the insured who is one of the parties of the contract.The answer to these questions
4(iv) Physical disability and mental infirmity. It is so desired as to elicit all information necessary for a proper evaluation of the risk and for rating. The insurer may seek any other information as desired for underwriting purposes. The answer is fair indication of the social status of the proposer and it will provide some indication of the ex-tent and for what purpose the vehicle is likely to be used.
(ii) Address: The proposer’s address is necessary for communication and is a cross checks on the area of use of the vehicle. Specimen of the proposal forms are given in Section 5 of the Tariff. and may place the insurer on enquiry concerning the moral hazard.
11(d) Details of insurance history . in case of commercial vehicles. These details give some idea about the physical and moral hazard.This is necessary because some insurers do not give comprehensive cover for vehicles manufactured earlier than a predetermined period or impose restrictions on older vehicles.(v) Previous convictions: A record of convictions for driving offences requires close investigations. Particulars required are: 6(i) Registration letters and number – For identification of the vehicles. as the case may be. (iii) Year of manufacture . 12(e) Questions relating to extra benefits. etc. 7(ii) Make of the vehicle – Engine and Chassis numbers – These are required for verification in case of accident. cancellation or imposition of special terms and conditions. 8(iv) Type of body. Seating Capacity and Cubic Capacity for private carsRating is based on value and cubic capacity and Licensed Carrying Capacity (goods or Passengers).
(v) Date of Purchase and Price (vi) Insured’s declared value of the vehicle
(c) Details of other vehicles owned by the proposer and details of accidents during the past 3 to 5 years. for which additional premium is charged and of information for which discount of premium is granted.This is required to ascertain whether there were any adverse features. such as declinature. such as no claim discount earned voluntary excess to be borne. 5(b) Details of vehicles to be insured. 2
. The enquiry is generally limited to a period of five years.
The form of the certificate of insurance is prescribed in the Act (in FORM 51). The differences in the Certificate of Insurance for different types of vehicles are to be found in the items (e) and (f) above. It is an offence to use a vehicle without a proper certificate of insurance issued by an authorized insure. 1988. These are 1(a) Certificate number. The only exceptions are Government vehicles and such other vehicles as may be specifically excluded by the Government.3The answers to the questions are followed by declaration in the nature of a warranty that the answers are correct and shall form the basis of contract with the company. 6(f) Limitations as to use. 3(c) Effective date of commencement of insurance for the purpose of the Act. 4(d) Date of expiry of insurance. Certain common features appear in all types of certificates of insurance. 1988. The wordings for private car and motorcycle certificate of insurance are as follows:
. These are followed by a certificate signed by the Authorized Insurer to the effect that the policy and the Certificate of Insurance are issued in accordance with the provisions of the Chapter X & XI of the Motor Vehicle Act. 5(e) Persons or classes of Persons entitled to drive. 2(b) Registration mark and number or description of the vehicle insured. 1
Certificate of Insurance :
This is the document evidencing that a motor vehicle is insured against third party liability as required under the Motor Vehicle Act.
shall if reasonably satisfied that such Certificate has been lost and that all reasonable efforts have been made to find it. and (c) Pays to the Insurer a fee of Rs.
. Destroyed or Mutilated Certificates : 3(a) Lodges with an insurer a declaration in which he declares that a Certificate of Insurance issued to him by such Insurer has been lost. or
Where the insured person
(b) Returns to the Insurer the Certificate of Insurance issued to him by such Insurer in a defaced or mutilated condition. or that it has been destroyed.Persons or classes of persons entitled to drive: Any of the following: 1(a) The Insured. 2(b) Any other person who is driving on the Insured’s order or with his permissionProvided that the person driving holds or had held and has not been disqualified from holding an effective driving license with all the required endorsements there on as per the Motor Vehicles Act and the Rules made there under for the time being in force to drive the category of motor vehicle insured hereunder. issue in lieu thereof a duplicate certificate of Insurance or cover note with the word ‘DUPLICATE’ prominently endorsed to that effect.in respect of each such certificate. soiled or is defaced or mutilated as the case may be. destroyed or mutilated and sets out full particulars of the circumstances connected with the loss or destruction of the Certificate and the efforts made to find it.
Lost. The Insurer. 50/.
1(i) Cover Notes insuring Motor Vehicles are to be issued only in Form 52 in terms of Rule 142... 4(4) Effective date of commencement of Insurance for the purpose of the Act a./ p.the risk is hereby held covered in terms of the Company’s usual form of ….policy applicable thereto (subject to any special conditions or restrictions which may be mentioned overleaf) for the period between the dates specified in the Schedule unless he cover be terminated by the company by notice in writing. 3(3) Name and address of Insured.m. chassis No. on
. type of vehicle (s) etc. a Cover Note shall be valid for a period of sixty days from the date of it’s issue and the insurer shall issue a policy of Insurance before date of expiry of the Cover Note. or description of the vehicle (s) insured. Sub-Rule (2) of Central Motor Vehicle Rules 1989. Sub Rule (1) of the Central Motor Rules 1989.•
Cover Note :
A cover note is usually issued when the policy and certificates of insurance cannot be immediately issued for any reason.m. 2The cover is worded along the following lines as prescribed by the Tariff: The insured described in the Schedule below having proposed for insurance in respect of the Motor Vehicle (s) described in the Schedule below and having paid the sum of ….
1(1) Registered Mark and No. in which case the insurance will thereupon cease and proportionate part of the annual premium otherwise payable for such insurance will be changed for the time the Company has been on risk. 2(2) Make and cubic capacity. 2(ii) It terms of Rule 142.
.Where the Insured by proposal and declaration dated as stated in the Schedule which shall be basic of this contract and is deemed to be incorporated herein has applied to the Company for insurance hereinafter contained and has paid or agreed to pay the premium as consideration for such insurance in respect of accident. 3(i) Section I deals with the loss or damage to the vehicle.5(5) Date of Expiry of insurance. This clause reads as follows:. 8(8) Additional Risks if any. 7(7) Limitations as to use. 4(ii) Section II deals with the liability to third parties. 2(b) Operative clause of a private comprehensive policy specifies the risk covered and the risks excluded. 9(9) Special Conditions 3It will be observed that the Cover Note incorporates a certificate that it is issued in accordance with the provisions of the Motor Vehicles Act.
• Policy forms: Policies insuring Motor Vehicles are to be issued only as per the Standard Form(s) given in INDIA MOTOR TARIFF (G. loss or damage occurring during the Period of Insurance. 6(6) Persons or classes of persons entitled to drive.R.3) The Policy Form consists of the following sections: 1(a) Recital clause.
8(iii) In commercial Vehicle Policies Section III deals 9With towing of any mechanically disabled vehicle. These are exclusion applicable to entire policy. 10(iv) Personal Accident Cover for Owner Driver. Registration mark and other details of the vehicle Limitations as to use Driver.
.This consists of type written matter relating to individual details of the contract. Signature of Authorized Officer. 11(c) General Exceptions. Premium Computation. In Motor
Trade policies. The column provides are: Policy No. 12(d) Conditions 13(e) Schedule of a Private Car Policy :. Date of signature of Proposal and declaration. Period of Insurance Geographical Area. Name of the Company The Insured’s name and address and Business or Occupation. Section III deals with Trailer attached to the Vehicle.
there could be a claim between the date of preparation and the date of expiry. the IDV of the vehicle fixed on the basis of understanding between the Insurer and the Insured.g. change of name. • Renewal Receipt: This is a document which is issued in lieu of the policy at renewal. This notice provides details of renewal premium. As notice is prepared in advance.
. If the vehicle is older than 5 years old. change of vehicle etc.g. An endorsement may be issued at the time of the policy to provide additional benefits and covers (e. Legal Liability to Driver) or to impose restrictions (e. including No Claim discount.• Endorsement An endorsement is a document.
It is the practice of companies to issue Renewal notice to the insured usually one month in advance of the date of expiry of the policy. which incorporates change in the terms of the policy. As a measure of economy and quick service. The insured’s attention is also invited to revise the Insured’s Declared Value as per depreciation provided in the Tariff / Policy. The renewal premium invited is subject to the provision that in the event of a claim suitable adjustments will be made in the premium. these Receipts are issued. excess accidental damage in a public carrier policy) the wordings of these endorsement are provided in the Tariff. This is a simpler document than the policy. if earned.. An endorsement may also be issued subsequently to record changes such as change of address. The present form of the Tariff contains 65 Endorsement.
The age of the vehicle is important from the underwriting point of view. As seen earlier vehicles are classified. The first important point to be considered is the year of manufacture. the purchase price and the insured’s declared value (IDV) of the vehicle based on the depreciation table provided in the Tariff/ Policy. as a vehicle becomes older. If the vehicle is older than 5 years old. It is natural that. according to their use. Private cars which are over 15 years old are not accepted on comprehensive terms but for third party risks only. The under writing guidelines adopted differ from insurer.Underwriting
The Basis of Underwriting:
The underwriting approach differs according to the type of vehicle. defects appears more frequently and metal fatigue sets in. Fire and Theft risks may however be covered.
. Thus the changes of under insurance are minimal. It may be noted that a vehicle will be considered to be a Constructive Total Loss. but there is broad agreement in the approach adopted. motor cycles and scooters and commercial vehicles. the IDV of the vehicle is fixed on the basis of understanding between the insurer and the insured. where the aggregate cost of retrieval and/or repair of the vehicle subject to the terms and conditions of the policy exceeds 75% of the IDV. into private cars. Cars which are Over 10 years and less than 15 years old are accepted for Comprehensive risks subject to satisfactory inspection report by the insurer’s automobile engineers or other officials.
there is a problem of obtaining spare parts. The repair costs are likely to be higher. Before acceptance. Such cars over 15 years old are accepted for Third Party risks only. • Taxies – Fresh Acceptances – Comprehensive Cover i) Up to 3 years for comprehensive cover. If the car is fitted with luxury items e. 500/. then there is the additional risk of the theft. Imported cars over 10 years and less than 15 years old are accepted on comprehensive terms with a higher excess. although insurers follow their own underwriting considerations”. exclusion of personal accident benefits and loading of premium. record players etc. In some cases.
. Each case is decided on the individual merits and acceptance is subject to an excess. The loss severity will be high because of the high speed. over 7 years Liability only. full details of the luxury fittings including the make and model and separate value for each item are obtained. The cost of repair of an imported car also high.g. ii) Up to 5 years subject to inspection and satisfactory claims experience iii) Over 15 years.Insurance on imported cars presents several problems. up to 7 years.without any discount). on inspection with a further compulsory excess of Rs. ‘ Sports cars are considered to be heavier risks than other cars of the normal type. driving may be restricted to named persons. These cars which are specially designed for high speed are usually driven by young drivers from affluent families. not only because of the cost of materials but because of the intricate design which would mean more time to spend on dismantling.
‘Following may be taken as model guidelines for acceptance of other
vehicles vis-à-vis their age. radios.
without any discount). 2500/. 5(iv) Disposal vehicles on inspection and subject to further compulsory excess of Rs. 7(B) Public Carriers i) Upto 5 years for comprehensive cover.over 10 years Liability only. v) Over 10 years renewals will be on liability only. over 12 years renewals will be on Liability only. iv) Renewals to be offered with normal terms subject to Satisfactory claims experience upto a period of 10 years. over 10 years renewals are offered on Liability only. ii) Over 5 years and upto 6 years.
• Commercial Vehicles – Fresh Proposals-Comprehensive Cover Goods Carrying Vehicles: 1(A) Private Carriers 2(i) Up to 5 years for comprehensive cover.iv) Renewal is on normal terms subject to satisfactory claims experience up to 10 years old vehicles. iii) Over 7 years liability only. subject to inspection and satisfactory claims experience or additional compulsory excess without discount.
. 6(v) Renewal to be offered with normal terms subject to satisfactory claims experience upto a period of 12 years. 3(ii) Over 5 and 7 years subject to satisfactory inspection report
4(iii) Over 7 years and up to 10 years subject to satisfactory
Inspection and a compulsory excess of Rs. 500/.
For these vehicles. thus exposed to greater incidence of accidents and wear and tear. like the taxies. This aspect of physical hazard is also taken care of in the rating system adopted I the Tariff for all type of vehicle. Private carriers are also better maintained. Even in same class of vehicles.•
How the Underwriting is done:
2The Use of the Vehicle:
The risk exposure due to the purpose for which the vehicle is used is taken care of in the rating systems adopted by the traffic. even those of the same class. A goods carrying vehicle used for delivery of aerated water bottles from door to door in a city will not be such a heavy risk as a lorry engaged in inter-state transportation of goods. This differential rating takes into account the density of population. Private Cars represent a lighter risk than taxies which are subject to optimum utilization. Private carriers are a better risk than public carriers. The Area of Operation: The area of in which the vehicle is used has a direct bearing upon the risk under all sections of cover of the comprehensive policy. The general nature of the goods carried is important for underwriting purposes. The use of the former is limited to carriage of own goods whereas public carriers. etc. The use to which vehicles are to be put. is a deciding factor in the relative degree of risk involved. especially if they are flammable or likely to explode. are subject to optimum utilization including driving during night. one risk may differ from another.
. density of road traffic. rates differ according to the zones in which it is used.
physical condition. third party claims and other claims. The approach adopted for acceptance of new proposal is equally applicable for
. The hazard arising from the driver can be assessed from the point of view of his age.The Driver of the Vehicle: Apart from the physical aspect of the vehicle and its usage. neglect and carelessness are two factors which are responsible for bad claims experience. the personal element is a dominating feature in relation to motor insurance which has an important bearing upon the loss ratio. By careful driving and by taking a pride in his vehicle. Claims experience has also to be considered at the time of renewal. Information is required to be submitted separately for ‘own damage’ claims. The physical aspect is taken care of in the rating system but just as important is the personal hazard of the driver which is not dealt with in the rating system. an insured can substantially reduce loss possibilities. Therefore. It is essentially the driver who is responsible for good or bad claims experience in motor insurance. On the other hand. or what should be done with the owner who is known to be a careless driver or the insured who pays scant attention to the mechanical condition of the car so as long as it is reasonably fit for his purposes. The Claims Experience: All proposal forms elicit full particulars of settled and outstanding claims in connection with any motor vehicle owned or driven by the proposer during the last preceding 3 to 5 years. driving experience and occupation. the concerns of underwriting are – how to deal with a young driver or a new driver. It may be mentioned that these cases could be regarded as a moral hazard in the wider sense of carelessness can dealt with by the underwriter.
However. If the loss experience on ‘own damage’ claims is bad. Moral Hazard: Moral hazard is. the owner or driver of a motor vehicle is more responsible for bad claims experience than the physical condition of the vehicle or the use to which it is put or the area in which it is used. But his behavior and attitudes during the currency of the policy and. perhaps. will e indicative of bad moral hazard. No Claim Discount: Insurers have found that the granting of no claim bonus discount is a powerful strategy to improve underwriting experience. Today it forms an integral part of rating systems. While considering acceptance of new business proposals it may not be easy to ascertain all aspects of moral hazard.renewal business. that is responsible for accidents. over the years. The arguments against are:1a) It creates extra clerical work for insurers in calculation of premiums
and preparation of renewal notices – work which is out of all proportion to its value. it has been a subject of controversy. more important in underwriting motor insurance than in other classes of insurance. when a claim arises.
. As mentioned earlier. And this aspect will have to be borne in mind at the time of renewal. the temperament and the personality of the driver. It is rare cases that mechanical breakdown causes road accidents. then renewal will have to be offered on the basis of ‘excess’ or restricted cover. It is the attitude. There are many arguments both for and against.
as if is uninsured. He has also to act. e.2b) It leads to many disputes between the insured an insurers. Thus the discount acts as an 5 effective incentive to the insured to exercise care.
c) The disputes between the insured and the insurers are not common
8 as is though of. The insured who considers himself blameless would resent the forfeiture of his discount. claims settled under knock-for-knock agreement.
.g. it is therefore. the tariffs permit discretion to the 9 insurers to allow no claim discount when they are satisfied that the 10 claim is being solely by virtue of the knock-for-knock agreement 11 and that the insured was free of blame for the accident. inconsistent to offer a further incentive to care. under Common Law. c) At any rate the policy contains a condition that the insured shall take all reasonable steps to safeguard the vehicle from loss or damage and maintain it in efficient condition. At any rate.
b) Indirectly. 2 3The arguments for the no claim discounts are :1a) There have been innumerable instances of insured bearing the cost 2 of a small accident in preference of forfeiting his discount either 3
because the amount of the prospective discount or because he was
4 desirous of maintaining a good record. the discounts help towards contribution To the object of
7 road safety.
Substantial discounts in the premium are offered if the insured establishes an accident free record. premium discounts are offered if the insured is willing to bear a certain portion of the loss himself. On an average each year there are 120000 road accidents with number of persons killed and injured exceeding 21000 and 110000 respectively. amongst its other activities. Transport Registration Authorities. premium discounts are offered if the insured is willing to bear a certain portion of the loss himself. The Loss Prevention Association of India established by the General Insurance Industry is actively engaged. Public Works Department. Road Transport Operators Associations. vehicle Owners and users and pedestrians have to participate. Road Research Laboratories. Automobile manufactures etc. The premium rating is so structured as to encourage loss prevention on the part of the motoring public. Again. in promoting prevention of road accidents. Substantial discounts in the premium are offered if the insured establishes an accident free record. This is problem which concerns the entire community and can be dealt with only by a multi-pronged action in which several government departments such as Police. The primary objective of this Association is to create an awareness of the need for loss preventions in the
. The General Insurance Industry plays a fairly significant role in promoting road safety and preventing road accidents. These incentives not only result in reduced cost of insurance but also encourage careful driving.Insurance and Road Safety: Road safety has become one of the greatest social problems of our time. These incentives not only result in reduced cost of insurance but also encourage careful driving. other organizations such as All India Motor Congress. Again.
Central Road Research Institute. To achieve its objectives. with a view to increasing operational efficiency and protecting valuable national wealth.various sectors of the economy.
. the Association collaborates with other institutions. which have a direct or indirect interest in road safety such as National Safety Council. the Automobile Associations and Traffic Police in various metropolitan centers.
Tariff for Private Cars