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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 contract of insurance must be entering into contract by the competent person in order to be a valid contract.Principles of Insurance & its Relevance with Motor Insurance • Utmost Good Faith • Insurable Interest • Principal of Indemnity • Proximate cause 1) Utmost Good Faith: Contract of insurance have all essential elements of nature of general contract. The competent person may be who is the age of majority according to law and who is of sound mind. According to section 2(h) and section (10) of Indian Contract Act. considerations. Like every other contract the insurance Contract is the sort of contract it is approved by the Indian Contract Act. Contracts of motor insurance are governed by the doctrine of utmost good faith. It is one of the important principles of that implies to the contract of . legal parties. It has to satisfy all the essential elements of a simple contract. Every person entering into an insurance contract should enter into by their free consent. 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 valid contract must have the essential element of offer and acceptance. Premium is the age consideration that must be given for starting the insurance contract. The object of the contract should be lawful. sound mind and free consent of the parties.
family size.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. in which area he will be driving the vehicle i. hilly area or plain area. 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 . past loss experience. which vehicle he is using. disclosure is absolute and positive. responsibility of disclosure of both parties should be a reciprocal duty i. Motor Insurance: Type of car.e. fire detection etc. If either party does not disclose the utmost good faith the other party may avoid the contract. Fire insurance: Inflammable materials. misrepresentation. value and details of driver. Some of the few examples of disclosure of material facts such as: Life insurance: Age. education. income. the driving history and traffic convictions of the driver.e. Thus.e. how good is the driver at driving the vehicle which can be known by his past record. fraud or mistake concerning the material facts to the risk should be disclosed. etc. nature and its uses. health. occupation. Similarly the insured’s duty of utmost good faith is disclosing the scope of insurance at the time of contract. Any concealment. The insured’s duty to disclose all material facts known to him but unknown to the insurer. etc i. No important material facts and figures must be concealed. Any past experience related to loss has to be informed to the insurer. In the context of the principle of utmost good faith.
g. Thus it is necessary for valid contract of insurance. . insurable interest must be actual and real and not arising out of mere expectation. 2) Insurable Interest: Insurable Interest means the insured must have some legal right to insure the subject matter. Without insurable interest the contract of insurance is void and unenforceable. It means that insurable interest must be a pecuniary interest. A person said to have an insurable interest in the subject matter has to have benefit from its existence and prejudice by its destruction. The insured must have an insurable interest in 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. Insurable interest is an important and fundamental principle of insurance. iii) The insured must bear a legal relationship to the subject matter whereby he stands to benefit by the safety of the property. right. The essentials of insurable interest are:i) The existence of property exposed to loss. damage or a potential liability. 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. Thus. damage. ii) Such property or liability must be the subject matter of insurance. interest or freedom from liability and stands to lose by and loss. injury or creation of liability. 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. For e.
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. Further. The insured also has a legal liability towards third parties. 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. the vehicle is the property. the finance company has an insurable interest in the vehicle until all the installments are repaid. Therefore. personal accident insurance. .Act 1988. According to this principle the assured in the case of loss against the policy made shall be fully indemnified. There are two corollaries to indemnity. the financiers. under Section 146 of the M. they are: 1) Subrogation and 2) Contribution. If a vehicle is purchased under a hire purchase agreement. which entitles him to insure the vehicle against damage and liability risk. 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. A clause included in the policy to protect the financier’s interest. he may suffer financial loss if he insures that liability through third party caused y negligent use of the vehicle. i. other contracts of insurance such as fire.V. marine and accident insurance are contracts of indemnity. the insured has insurable interest.In motor insurance. The word “indemnity” implies that protection. security against damage or loss of security against legal responsibility. which is exposed to loss or damage.e. Indemnity is one of the fundamental principles that except life insurance.
It is also referred as getting into the shoes of the others. the insurers are to share the loss in proportion to the amount assured by each of them. 50.000 from insurer B. According to this principle. This is the one important principle essential for valid insurance contract.000 then the claim will come in proportion from both the insurer’s i.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. 200.. For e. It does not mean that if loss occurs and if a person has double insurance then he can claim the whole amount from both . 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. If a car is insured by two insurers for Rs.000 from insurer A and Rs. It implies that the substitution of the insurer in place of the insured in respect of the latter’s of Subrogation. 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.g. Contribution in simple words means to contribute the amount. 100. the case of double insurance. A loss occurs for 75. This doctrine of contribution also applies only to contracts of indemnity i. For e. to fire and marine insurance. Rs 25.g.e.000 from insurer B.000 from insurer A and for Rs. fire & marine insurance. This principle holds good only in the case of motor.e. which means insurer may give the claim to you but they can get the amount of loss from the other party.
The doctrine of proximate cause applies to motor insurance as to other classes of insurance. The doctrine also applies to third party claims. . 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.the insurers. 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. Causa Proxima is necessary for a valid contract of insurance. this way he can make profit out of these contracts. 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. Insured perils means the perils covered by insurer under the policy. It has been defined as “The active efficient cause of that sets in motion a train of events which brings about a result. without the intervention of any force started and working actively from a new and independent source”.
Motor Vehicles Act The Motor vehicles Act 1939: Motor Vehicles Act in actual sense came into existence in 1939.A and Chapter VIII of the Act provides for insurance of motor vehicles against third party risks. Road Safety committee. 4 of 1939) consolidated and amended the law relating to motor vehicles. It was long time back in 1939. construction equipment and maintenance of motor vehicles. Various Committees like the National Transport policy committee. maintenance and operation of motor vehicles. when this Motor Vehicles Act has come into existence and properly came in force on 1st July 1939. 1939 (No. Low powered Two-wheelers Committee. A need was. pattern of passenger and freight movements. registration of motor vehicles. as also the law commission went into the different aspects of . Under this Act Chapter VII. Besides this it also take into consideration the matters relating to licensing of drivers of motor vehicles. The Motor Vehicle Act. control of traffic etc. If we see the provisions of this we will realize that it provides for various matters relating to the use. national Police Commission. This was amended a several times to keep it up to date. development of road network and particularly the improved techniques in motor vehicles management. felt that this law should now take into account also the changes in the road transport technology. But this did not include all the provisions where as Chapter VIII was brought in force on 1st July 1946. however.
d) Standards for anti-pollution control devices. 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. b) Stricter procedures for grant of driving license and period of their validity. Therefore a working group was constituted in January 1984 to review the provisions of the Motor Vehicles Act. 59 of 1988) is the outcome of the recommendations proposed by various Committees. c) Laying down of standards for the components and parts of motor vehicles. 1988: The Motor Vehicles Act. . 1988 (Act No. which examined the provisions of the 1939 Act thoroughly and submitted to the Central Government an exhaustive report suggesting constructive amendments to the Act. 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. It has replaced the earlier 1939 Act and it became effective from 1st July 1989. In 1985 General Insurance Corporation has appointed a Committee of experts. They recommended updating. e) Provisions for issuing fitness certificates of vehicles also by the authorized testing stations.road transport. 1939 and to submit draft proposals for suitable legislation to replace the existing Act. simplification and rationalization of this law.
neglect or default of the owner. be liable to pay compensation n the respect of such death or disablement in accordance wit the provisions of this section. jointly and severally. the owner of the vehicle shall. the owners of the vehicle shall. j) Constitution of Road Safety Councils. owners. 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. h) Administration of Solarium Fund by General Insurance Corporation. i) Maintenance of State registers for driving licenses and vehicle registration. or vehicles concerned or any other person. . as the case may be. No Fault Liability: Section 140(1) of Motor Vehicles Act. 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. of the vehicle. k) Seeking to provide for more deterrent punishment in cases of certain offences. or.f) Enabling provision for updating the system of registration marks. g) Liberalized schemes for grant of All-India Tourist permits as also national permits for goods carriages.
or (b) Destruction or permanent impairing of the powers of any member on joint (c) Permanent disfiguration of the head or face. (a) Permanent privation of the sight of either eye or the hearing either ear. 25.25. It is provided that grievous hurt shall have the same meaning as in the Indian Penal Code. or privation of any member or joint. Earlier. 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. 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. it was Rs. 000/-in the case of permanent disablement to motor vehicle act 1988.000/.for death and Rs.000/-for permanent disablement. 000/.” 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.50. Permanent disablement is defined as any injury or injuries involving.However the amount of compensation payable is restricted to Rs. • Permanent Privation of the hearing of either ear. . 12.in the case of death and Rs.
000/-for grievous hurt. 25. . the Central government. 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. • Fracture or dislocation of a bone or tooth.000/. (Earlier to amendment. and the State Government as decided by the Central government. which is. 2. it was Rs. so for them this solatium fund is created to provide them compensation. consists of contributions from the General Insurance Industry. Solatium fund: It is the fund.8500/.• Privation of any member or joint.for death and Rs. The compensation payable form death claims is fixed at Rs. 500/-after the amendment to Motor Vehicles Act 1988. • Permanent disfiguration of the head or face.12. A solatium fund is created so as to provide compensation for the victims of hit & run cases.and in respect of ‘grievous hurt’ Rs. 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. You must have seen a lot of accidents on road where a vehicle had hit the other vehicle or peddlers on the road.
and revised with effect from 1st July 2002.V. 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. • Motorized Two Wheelers • And Commercial Vehicles. the Indian Motor Tariff. classifies the motor vehicles broadly in 3 categories: • Private Cars. but in technical sense we can define a “Motor Vehicle” as under Section 2 (28) of the M. which governs the Motor Insurance business in India. Types of Motor Vehicles running on the road: There are various motor vehicles plying on the road but for the purposes of insurance.Types of Motor Vehicles Definition of Motor Vehicle: In simple words we can say a motor vehicle is that which runs with a motor. 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. .
2) Two wheelers: Motorized two wheelers can be with or without sidecar. 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. racing. speed testing etc. which is used for social. speed testing and sue for any purpose in connection with the motor Trade.1) Private Cars: These are: a) Private Car type vehicles are used for social. speed testing and used for any purpose in connection with the Motor Trade is excluded. c) Three Wheeled vehicles. 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. It also excludes carriage of goods other than samples. pace making. Trial. The Act defines a “private carrier” as “an owner . domestic and pleasure purposes and also for professional purposes. which also includes motorized rickshaw cabin scooters used for private purposes. 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. b) Motorized three wheeled vehicles (including motorized rickshaws/ cabin body scooters) are used for private purpose only. reliability trial. These are vehicles used under a Private Carrier’s permit within the meaning of the Motor Vehicles Act 1939. racing. reliability trial. pace making.
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”. whether in pursuance of the terms of a contract or agreement or otherwise. After realizing this. for another person at any time and in any public place for hire or reward.2002. 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. as people who were using it for personal use and people those who were using it for business purposes were paying the same premium. For e. I own AXC Co.” When the Motor Vehicles Act (of 1988) was amended it did not have this category.7. Motor Tariff Categorized the Goods Carrying Vehicle as ‘Own Goods Carrier’ and ‘General Cartage Carrier’ separately for rating purpose. all goods carrying vehicles are called “Goods Carriage” and they did not categories them into Public carrier and Private carrier. 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. when the tariff was revised in 1.A. 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. renamed as Public carrier and Private carrier for rating purpose.g. But this was not the right way to charge premium.C. . T.
but still they were unable to settle the various disputes regarding third party damage / injury. MACT is formed so as to provide assistance to general public when any third party claim arises. . 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. These Tribunals were introduced with the object of providing facilities for less expensive and quick settlement of third party claims. 1939(as amended). In a way Tribunal has all the powers.Lok Adalats and MACT Introduction to Motor Accidents Claims Tribunal: Under the provisions of the Motor Vehicle Act. The procedures of this Tribunal is simpler then those of Civil Court. 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.
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. .Lok Adalats: Lok Adalats as the name says are the Adalats formed for the general public to settle their disputes regarding claim settlement. Chapter XI of the Lok Nyayalaya rules. Chief justice of India.N Bhagwati. Ex.C. 1986 provide special provisions for the amicable settlement of pending cases before MACT. 1939 section 49(2) of the Motor Vehicle Act. 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. 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. 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.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. 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.T or District and Session Judge.
etc. A notice has to be made to all the parties to be present in Lok Nyayalaya on the appointed date and time.A. . 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. for the opposite party and the insurer has to be obtained well in advance for placing the cases before the Lok Nyayalaya.A consent application has to be taken from the applicant and also the consent of the advocates for the applicants. b) Government pleader. c) Senior Advocates having knowledge about M. After this a compromise memo will be submitted to MACT for passing the final order. 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.C.T matters. 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.
This Scheme is particularly applicable to “Non-Fatal” injuries i. which is a pre litigation of scheme. 2. It provides a fair assessment of claims by independent judges. medical certificates. where the death of the person does not occur. The Jalad Rahat Yojana offers the following benefits as: 1. If the amount assessed is not acceptable to the claimant. medical practitioners etc. 2 or 3 months. proof of age and income. The settlement is arrived by an independent panel comprising retired judges. In this if a claim arises then the claimant instead of going to MACT can go straight away to this forum.Jalad Rahat Yojana: Another Scheme. lawyer’s fees or any other charges. 3. 4. etc. The claims instead of filing a claim before the MACT can submit to the company the relevant claim documents such as copy of FIR. . Settlement of claim within shortest possible time i. by the GIC and the four companies is called Jalad Rahat Yojana. retired insurance executives and medical practitioners. Payment is made in full and final settlement of claims. he has a right to seek redress or help through the MACT. It is a cheapest remedy for the applicant as it does not charge any court fees. which was formulated. retired judges.e.e.
a motor vehicle in a public place. there shall also be a policy of insurance under the public liability insurance act. or cause or allow any other person to use. 2b) Any local authority.Necessity for third party insurance and its Exemptions 1 No person shall use. unless there is in force in relation to the use of the vehicle by that person or that other person. dangerous or hazardous goods. 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. 1991. This section embodies the compulsory nature of third party insurance for using a vehicle in a public place. or meant to carry. a policy of insurance complying with the requirements of this Chapter (chapter XI) Provided that in case of a vehicle carrying. 3c) Any state transport undertaking . except as a passenger. 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. as the case may be. 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.
the necessity for Insurance against third party risks and its Exemptions. . Summary In the above we have discussed about the Legal Aspects related to Third Party Risks. 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. The fund has to be established in accordance with the Rules framed under the Act.
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.4. It can be extended to provide coverage to include Bangladesh. and Maldives & Sri Lanka. Motor Insurance includes Private Cars. Nepal. Bhutan.1. 2) The extension of Geographical Area: Under Motor Insurance the extension of area is provided to take a motor insurance policy. Pakistan. For risks. references should be made to TAC for advice thereon.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. which have not been provided in the tariff. 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 . Under General regulations (GR). Under GR.
irrespective of the class of vehicle. 500/. Under GR. In case of loss that amount is given to the insured.7. 3) Valued policies: These are the policies under which a sum is agreed upon and policy is taken for that amount. by charging a flat additional premium. 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. Endorsement IMT – 2 is to be used. Such geographical extensions. . 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.per vehicle. For such policies.per vehicle. It is not permitted to issue to Agreed Value Policies under this tariff excepting for policies covering vintage cars as defined under above. 100/. irrespective of the class of vehicle.as the case may be. Package policy For such extensions Endorsement IMT –1 is to be used. as stated below for the period not exceeding 12 months: For package policy. than Rs. For policies other Rs .
. It is so desired as to elicit all information necessary for a proper evaluation of the risk and for rating.Documents related with motor insurance • Proposal form The proposal form is the basis of insurance. Specimen of the proposal forms are given in Section 5 of the Tariff. 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. 2 (ii) Address: The proposer’s address is necessary for communication and is a cross checks on the area of use of the vehicle. 4(iv) Physical disability and mental infirmity. 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. but it is difficult to get precise answers particularly in respect of persons other than the insured who may drive the car. The insurer may seek any other information as desired for underwriting purposes. (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.The answer to these questions 3 are important. and may place the insurer on enquiry concerning the moral hazard. The queries made/details stated in the Proposal form are the minimum requirements to be furnished by a proposer.
such as no claim discount earned voluntary excess to be borne. as the case may be. cancellation or imposition of special terms and conditions. 9 10 (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. 2 .(v) Previous convictions: A record of convictions for driving offences requires close investigations. These details give some idea about the physical and moral hazard. 8(iv) Type of body. (iii) Year of manufacture .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. 5(b) Details of vehicles to be insured. etc. The enquiry is generally limited to a period of five years. Particulars required are: 6(i) Registration letters and number – For identification of the vehicles. 7(ii) Make of the vehicle – Engine and Chassis numbers – These are required for verification in case of accident. 12(e) Questions relating to extra benefits. in case of commercial vehicles. such as declinature. Seating Capacity and Cubic Capacity for private carsRating is based on value and cubic capacity and Licensed Carrying Capacity (goods or Passengers). 11(d) Details of insurance history . 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.
These are 1(a) Certificate number. 1988. 3(c) Effective date of commencement of insurance for the purpose of the Act. 4(d) Date of expiry of insurance. 6(f) Limitations as to use. The wordings for private car and motorcycle certificate of insurance are as follows: . It is an offence to use a vehicle without a proper certificate of insurance issued by an authorized insure. 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. The form of the certificate of insurance is prescribed in the Act (in FORM 51). The only exceptions are Government vehicles and such other vehicles as may be specifically excluded by the Government. 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.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. The differences in the Certificate of Insurance for different types of vehicles are to be found in the items (e) and (f) above. 1988. Certain common features appear in all types of certificates of insurance.
soiled or is defaced or mutilated as the case may be. 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. 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. The Insurer. shall if reasonably satisfied that such Certificate has been lost and that all reasonable efforts have been made to find it. . 50/. 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. and (c) Pays to the Insurer a fee of Rs. • Lost.in respect of each such certificate. 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. issue in lieu thereof a duplicate certificate of Insurance or cover note with the word ‘DUPLICATE’ prominently endorsed to that effect. or that it has been destroyed.Persons or classes of persons entitled to drive: Any of the following: 1(a) The Insured.
m. chassis No. 1(i) Cover Notes insuring Motor Vehicles are to be issued only in Form 52 in terms of Rule 142. Engine no. 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.m. 3(3) Name and address of Insured. 4(4) Effective date of commencement of Insurance for the purpose of the Act a. 2(2) Make and cubic capacity./ p.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. 2(ii) It terms of Rule 142. type of vehicle (s) etc.the risk is hereby held covered in terms of the Company’s usual form of …. 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 …. on . 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. Sub-Rule (2) of Central Motor Vehicle Rules 1989.. 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.
3(i) Section I deals with the loss or damage to the vehicle.5(5) Date of Expiry of insurance. 1 • Policy forms: Policies insuring Motor Vehicles are to be issued only as per the Standard Form(s) given in INDIA MOTOR TARIFF (G. 8(8) Additional Risks if any. 5 6 . This clause reads as follows:.R.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. loss or damage occurring during the Period of Insurance. 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. 2(b) Operative clause of a private comprehensive policy specifies the risk covered and the risks excluded. 6(6) Persons or classes of persons entitled to drive.3) The Policy Form consists of the following sections: 1(a) Recital clause. 7(7) Limitations as to use. 4(ii) Section II deals with the liability to third parties.
Name of the Company The Insured’s name and address and Business or Occupation.7 8(iii) In commercial Vehicle Policies Section III deals 9With towing of any mechanically disabled vehicle. Period of Insurance Geographical Area. Signature of Authorized Officer. Premium Computation. The column provides are: Policy No. In Motor Trade policies.This consists of type written matter relating to individual details of the contract. Registration mark and other details of the vehicle Limitations as to use Driver. These are exclusion applicable to entire policy. . Section III deals with Trailer attached to the Vehicle. Date of signature of Proposal and declaration. 12(d) Conditions 13(e) Schedule of a Private Car Policy :. 11(c) General Exceptions. 10(iv) Personal Accident Cover for Owner Driver.
these Receipts are issued. This is a simpler document than the policy. As notice is prepared in advance. Legal Liability to Driver) or to impose restrictions (e. excess accidental damage in a public carrier policy) the wordings of these endorsement are provided in the Tariff. • Renewal Receipt: This is a document which is issued in lieu of the policy at renewal.• Endorsement An endorsement is a document. . the IDV of the vehicle fixed on the basis of understanding between the Insurer and the Insured.g. change of name. If the vehicle is older than 5 years old. if earned. • Renewal Notice: 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. An endorsement may be issued at the time of the policy to provide additional benefits and covers (e. The insured’s attention is also invited to revise the Insured’s Declared Value as per depreciation provided in the Tariff / Policy. change of vehicle etc. This notice provides details of renewal premium. An endorsement may also be issued subsequently to record changes such as change of address. there could be a claim between the date of preparation and the date of expiry.. The renewal premium invited is subject to the provision that in the event of a claim suitable adjustments will be made in the premium. including No Claim discount. The present form of the Tariff contains 65 Endorsement.g. which incorporates change in the terms of the policy. As a measure of economy and quick service.
. Fire and Theft risks may however be covered. It is natural that. but there is broad agreement in the approach adopted. defects appears more frequently and metal fatigue sets in. The under writing guidelines adopted differ from insurer. The first important point to be considered is the year of manufacture. as a vehicle becomes older. the purchase price and the insured’s declared value (IDV) of the vehicle based on the depreciation table provided in the Tariff/ Policy. Private cars which are over 15 years old are not accepted on comprehensive terms but for third party risks only.Underwriting • The Basis of Underwriting: The underwriting approach differs according to the type of vehicle. into private cars. As seen earlier vehicles are classified. If the vehicle is older than 5 years old. Thus the changes of under insurance are minimal. motor cycles and scooters and commercial vehicles. It may be noted that a vehicle will be considered to be a Constructive Total Loss. 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. 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. according to their use. The age of the vehicle is important from the underwriting point of view.
exclusion of personal accident benefits and loading of premium.without any discount). The repair costs are likely to be higher. These cars which are specially designed for high speed are usually driven by young drivers from affluent families. The loss severity will be high because of the high speed. on inspection with a further compulsory excess of Rs. If the car is fitted with luxury items e. The cost of repair of an imported car also high. up to 7 years. Before acceptance. • Taxies – Fresh Acceptances – Comprehensive Cover i) Up to 3 years for comprehensive cover.Insurance on imported cars presents several problems. Each case is decided on the individual merits and acceptance is subject to an excess. there is a problem of obtaining spare parts. Imported cars over 10 years and less than 15 years old are accepted on comprehensive terms with a higher excess. 500/. record players etc. . In some cases. ‘Following may be taken as model guidelines for acceptance of other vehicles vis-à-vis their age. ii) Up to 5 years subject to inspection and satisfactory claims experience iii) Over 15 years. radios. full details of the luxury fittings including the make and model and separate value for each item are obtained. driving may be restricted to named persons. over 7 years Liability only. ‘ Sports cars are considered to be heavier risks than other cars of the normal type. although insurers follow their own underwriting considerations”. not only because of the cost of materials but because of the intricate design which would mean more time to spend on dismantling. Such cars over 15 years old are accepted for Third Party risks only. then there is the additional risk of the theft.g.
over 10 years Liability only. over 10 years renewals are offered on Liability only. v) Over 10 years renewals will be on liability only. iii) Over 7 years liability only. 7(B) Public Carriers i) Upto 5 years for comprehensive cover. 500/. over 12 years renewals will be on Liability only. 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. ii) Over 5 years and upto 6 years. 5(iv) Disposal vehicles on inspection and subject to further compulsory excess of Rs. subject to inspection and satisfactory claims experience or additional compulsory excess without discount. 2500/. . iv) Renewals to be offered with normal terms subject to Satisfactory claims experience upto a period of 10 years. 1 • 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. 6(v) Renewal to be offered with normal terms subject to satisfactory claims experience upto a period of 12 years.without any discount).
For these vehicles. This differential rating takes into account the density of population. The use to which vehicles are to be put. Even in same class of vehicles. is a deciding factor in the relative degree of risk involved. The use of the former is limited to carriage of own goods whereas public carriers. Private carriers are a better risk than public carriers.• 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. like the taxies. density of road traffic. etc. especially if they are flammable or likely to explode. thus exposed to greater incidence of accidents and wear and tear. are subject to optimum utilization including driving during night. 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 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 those of the same class. one risk may differ from another. Private Cars represent a lighter risk than taxies which are subject to optimum utilization. rates differ according to the zones in which it is used. 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. .
It is essentially the driver who is responsible for good or bad claims experience in motor insurance. Information is required to be submitted separately for ‘own damage’ claims. Therefore. On the other hand. 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. The approach adopted for acceptance of new proposal is equally applicable for . an insured can substantially reduce loss possibilities. 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. neglect and carelessness are two factors which are responsible for bad claims experience. 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.The Driver of the Vehicle: Apart from the physical aspect of the vehicle and its usage. the personal element is a dominating feature in relation to motor insurance which has an important bearing upon the loss ratio. the concerns of underwriting are – how to deal with a young driver or a new driver. third party claims and other claims. physical condition. The hazard arising from the driver can be assessed from the point of view of his age. 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. By careful driving and by taking a pride in his vehicle. driving experience and occupation. Claims experience has also to be considered at the time of renewal.
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. perhaps. 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. And this aspect will have to be borne in mind at the time of renewal. There are many arguments both for and against. more important in underwriting motor insurance than in other classes of insurance. If the loss experience on ‘own damage’ claims is bad. . However. then renewal will have to be offered on the basis of ‘excess’ or restricted cover. While considering acceptance of new business proposals it may not be easy to ascertain all aspects of moral hazard. It is the attitude. As mentioned earlier. Moral Hazard: Moral hazard is. will e indicative of bad moral hazard. It is rare cases that mechanical breakdown causes road accidents. that is responsible for accidents.renewal business. No Claim Discount: Insurers have found that the granting of no claim bonus discount is a powerful strategy to improve underwriting experience. the temperament and the personality of the driver. it has been a subject of controversy. But his behavior and attitudes during the currency of the policy and. over the years. Today it forms an integral part of rating systems. when a claim arises.
g. 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. as if is uninsured. He has also to act. it is therefore. The insured who considers himself blameless would resent the forfeiture of his discount. c) The disputes between the insured and the insurers are not common 8 as is though of. 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. inconsistent to offer a further incentive to care. 6 b) Indirectly. claims settled under knock-for-knock agreement. 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. 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. under Common Law. . the discounts help towards contribution To the object of 7 road safety.
other organizations such as All India Motor Congress. amongst its other activities. premium discounts are offered if the insured is willing to bear a certain portion of the loss himself. Again. Road Transport Operators Associations. Automobile manufactures etc. Substantial discounts in the premium are offered if the insured establishes an accident free record. The primary objective of this Association is to create an awareness of the need for loss preventions in the . vehicle Owners and users and pedestrians have to participate. Transport Registration Authorities. 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. Substantial discounts in the premium are offered if the insured establishes an accident free record. Again. Public Works Department. The Loss Prevention Association of India established by the General Insurance Industry is actively engaged. Road Research Laboratories. premium discounts are offered if the insured is willing to bear a certain portion of the loss himself.Insurance and Road Safety: Road safety has become one of the greatest social problems of our time. On an average each year there are 120000 road accidents with number of persons killed and injured exceeding 21000 and 110000 respectively. These incentives not only result in reduced cost of insurance but also encourage careful driving. 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. in promoting prevention of road accidents. The premium rating is so structured as to encourage loss prevention on the part of the motoring public.
with a view to increasing operational efficiency and protecting valuable national wealth. the Association collaborates with other institutions. the Automobile Associations and Traffic Police in various metropolitan centers. To achieve its objectives. Central Road Research Institute.various sectors of the economy. which have a direct or indirect interest in road safety such as National Safety Council. .
Tariff for Private Cars .
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