MOTOR INSURANCE

CHAPTER 1 INSURANCE
1.1 INTRODUCTION
Insurance is a contract between an insurer (company) and the insured under which the insurer undertakes to compensate the insured for loss arising from the risk insured against. In consideration, the insured agrees to pay a sum called as Premium in advance. The instrument containing the contract of insurance is called as Policy. The things, property or life, which forms basis of insurance, is called as subject matter of Insurance. The Insurance Act, 1938 was passed by the Legislature on 26th February, 1968 and it came into force on 1st July, 1939. It has been amended several times. It extends to whole of India. It is an Act to consolidate and amend the law relating to the business of insurance. Risk is there at every walk of life, also endangers life itself. In the same way all financial deals, as well as possession of money and property goods etc. are fraught with the element of risk. All risks do not actually occur at all the times and hence, it is possible to calculate probable chances of any particular risk materializing. It is quite clear that all the people do not face risks at the same time. Thus, transfer of risk to another i.e. The insurer is in fact a pooling the risks. If insurance did not exist, each individual had to bear the losses on his own. Insurance, in effect means that each one in pool undertakes to bear a portion of the loss. Such an agreement has proved to be advantageous to everyone as it is uncertain as to who will suffer the loss. Thus, in course of time, the idea developed that such a common pool of resources should be managed by experts who would calculate the quantity of the contribution to be levied on each individual. In this way the idea of Insurance developed. In modern times, the insurance has come to be highly commercial undertaking however, the principle is still the same

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MOTOR INSURANCE viz., and the insurer collects premium for a large number of persons and covers them against a large variety of risks.

1.2 HISTORY OF INSURANCE IN INDIA
Insurance in India has its history dating back till 1818, when Oriental Life Insurance Company was started by Europeans in Kolkata to cater to the needs of European community. Pre-independent era in India saw discrimination among the life of foreigners and Indians with higher premiums being charged for the latter. It was only in the year 1870, Bombay Mutual Life Assurance Society, the first Indian insurance company covered Indian lives at normal rates. At the dawn of the twentieth century, insurance companies started mushrooming up. In the year 1912, the Life Insurance Companies Act, and the Provident Fund Act were passed to regulate the insurance business. However, the disparage still existed as discrimination between Indian and foreign companies. The oldest existing insurance company in India is National Insurance Company Ltd, which was founded in 1906 and is doing business even today. The Insurance industry earlier consisted of only two state insurers: Life Insurers i.e. Life Insurance Corporation of India (LIC) and General Insurers i.e. General Insurance Corporation of India (GIC). GIC had four subsidiary companies. With effect from December 2000, these subsidiaries have been de-linked from parent company and made as independent insurance companies: Oriental Insurance Company Limited, New India Assurance Company Limited, National Insurance Company Limited and United India Insurance Company Limited.

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MOTOR INSURANCE

1.3 DEFINITIONS
o The Dictionary of Business and Finance has defined Insurance as a

“Form of contract or agreement under which one party agrees in return for a consideration to pay an agreed amount of money to another party to make good a loss, damage, or injury to something of value as a result of some uncertain event in which the insured has pecuniary interest”. o The common definition for insurance given in the Insurance Act is:

“Insurance is a social device in which a group of individuals (insured) transfer risk to another party (Insurer) in order to combine loss experience, which permits statistical prediction of losses and provides for payment of losses from funds contributed (premiums) by all members who transferred risk”. The purpose of insurance mode of risk transfer is to provide economic protection against the losses that may be incurred but to chance events such as:  Death  Disability  Economic losses

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MOTOR INSURANCE

1.4 TYPES OF INSURANCE
Insurance provides compensation to a person for an anticipated loss to his life, business or an asset. Insurance is broadly classified into two parts covering different types of risks: 1. Long-term (Life Insurance) 2. Short-term Insurance (Non-life Insurance)

Long-term Insurance:
Long term insurance is so called because it is meant for a long-term period, which may stretch to several years or whole lifetime of the insured. Longterm insurance covers all life insurance policies. Insurance against risk to one's life is covered under ordinary life assurance.

Short–term Insurance:
Also known as non-life insurance, general insurance is normally meant for a short-term period of twelve months or less. Recently, longer-term insurance agreements have made an entry into the business of general insurance but their term does not exceed five years. General insurance can be classified as follows:

Fire Insurance
Fire insurance provides protection against damage to property caused by accidents due to fire, lightening or explosion, whereby boilers not being used for industrial purposes cause the explosion. Fire insurance also includes damage caused due to other perils like storm tempest or flood; burst pipes; earthquake; aircraft; riot, civil commotion; malicious damage; explosion; impact.

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MOTOR INSURANCE

Marine Insurance
Marine insurance basically covers three risk areas, namely, hull, cargo and freight. The risks, which these areas are exposed to, are collectively known as "Perils of the Sea". These perils include theft, fire, collision etc.

Marine Cargo

Marine cargo policy provides protection to the goods loaded on a ship against all perils between the departure and arrival warehouse. Therefore, marine cargo covers carriage of goods by sea as well as transportation of goods by land.

Marine Hull

Marine hull policy provides protection against damage to ship caused due to the perils of the sea. Marine hull policy covers three-fourth of the liability of the hull owner (ship owner) against loss due to collisions at sea. Associations formed by ship owners look after the remaining 1/4th of the liability.

Miscellaneous

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Every vehicle before being driven on roads has to be compulsorily insured. After World War I. All motor vehicles are required to be registered with the road transport authorities and insured for Third Party Liability. where the first motor insurance policy was introduced into England in 1894 to cover third party liabilities. money insurance. and thus require insurance. Much of these are attributable to a sudden spurt in the number of vehicles. The basic premise is that the motor vehicle could either cause injury or to a subject of damage. The need for compulsory motor insurance is obvious. theft insurance. This is because it is statutorily mandated in most parts of the world. 1930 & 1934 which were subsequently consolidated by Road Traffic Act. engineering insurance etc. And in 1899 the policy was extended to cover the accidental damage similar to what is known as comprehensive policy. In 1903.MOTOR INSURANCE As per the Insurance Act. This position warranted compulsory Third Party Liability insurance in England through Road Traffic Act. 1960. personal accident insurance. there was a considerable increase of motor vehicles in all the countries and an increase in road accidents. the first company transact motor insurance was Car & General Insurance Corporation. all types of general insurance other than fire and marine insurance are covered under miscellaneous insurance. The automobile insurance policy represents a combined -6- . health insurance. Chapter 2 MOTOR INSURANCE Motor insurance is one of the largest non-life insurance of the world. Some of the examples of general insurance are motor insurance.K. In India the Motor Vehicles Act was passed in 1939 and in 1946 the third party insurance was introduced compulsorily. Motor Insurance originated in U. There has been a phenomenal rise in the motor accidents in the last 4-5 years.

It excludes use for hire or reward..1 TYPES OF VEHICLES There are various motor vehicles playing on the road but for the purposes of insurance. The insurance for own vehicle damage is not mandatory. loss or damage to his property or life and the third party coverage. b) Motorized three wheeled vehicles (including motorized rickshaws/ cabin body scooters) are used for private purpose only. 2. Private Cars. pace making. classifies the motor vehicles broadly in 3 categories. The Motor Vehicle Act. which governs the Motor Insurance business in India. -7- . 1939 introduced compulsory insurance to take care of those who may get injured in an accident. the Indian Motor Tariff. 1) Private Cars a) Private Car type vehicles are used for social.MOTOR INSURANCE coverage of the vehicles including accessories. speed testing and used for any purpose in connection with the Motor Trade is excluded. It also excludes carriage of goods other than samples. racing. reliability trial. speed testing and sue for any purpose in connection with the motor Trade. Trial. domestic and pleasure purposes and sometimes for professional purposes of the insured or used by the insured’s employees for such purpose. and revised with effect from 1st July 2002. viz. In India the Tariffs Advisory Committee regulates this business. Motorized Two Wheelers and Commercial Vehicles.

MOTOR INSURANCE 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. speed testing and use for any purpose in connection with the Motor Trade. 2) Two Wheelers : Motorized two wheelers it can be with or without sidecar. 3) Commercial Vehicles : -8- . pace making. racing. domestic also and for pleasure purposes and professional purposes. which is used for social. which also includes motorized rickshaw cabin scooters used for private purposes. reliability trial.

for another person at any time and in any public place for hire or reward. The Act defines a “private carrier” as “an owner 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”. But this was not the right way to charge premium. whether in pursuance of the terms of a contract or agreement or otherwise. For Example. 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. it means this vehicle is under the category of Private carrier vehicle.MOTOR INSURANCE Goods carrying vehicles (own goods): such as trucks and trolleys. These are vehicles used under a Private 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. 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. I own AXC Co.” When the Motor Vehicles Act (of 1988) was amended it did not have this category. Motor Tariff Categorized the Goods Carrying Vehicle as ‘Own Goods Carrier’ and ‘General Cartage Carrier’ separately for rating purpose. -9- . Goods carrying vehicles (General Cartage): These are the vehicles which are 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 categorise them into Public carrier and Private carrier. which carry goods for their own purposes or for their private use.

T. when the tariff was revised in 1. 1) Passengers Carrying Vehicles: .7.2 Vehicles used for carrying passengers for hire or reward.10 - . cart. carriage or other vehicles vehicle.MOTOR INSURANCE After realizing this. without means of self-propulsion including agricultural implements drawn or hauled by self-propelled 2.2002.C.A. it renamed as Public carrier and Private carrier for rating purpose. 4)Trailers These are any truck.

Taxis or Private Car Type Vehicles.11 - . which are plying on road for public . 2) Passenger Carrying Vehicles may be 4 wheeled or 3 wheeled for hire or reward: 1.MOTOR INSURANCE These are the vehicles which are used for carrying passengers for hire or reward. hire.

Bull graders  Cinema Film Recording and Publicity Vans. These are the other vehicles which are used for carrying passengers and for doing this work they get a payment to carry passengers.12 - .MOTOR INSURANCE 2. Private Car type vehicles let out on Private Hire and driven by the Hirer or any driver with his permission. The other Miscellaneous and Special Types of Vehicles which we can find are:  Agricultural Tractors  Ambulances  Bulldozers. Private Type Taxis which are let out on Private hire direct from the Owner with or without meters and driven by the Owner or an employee of the Owner. 3. 4. Private Car Type Vehicles. which are owned by Hotels and hired by them to their guests.  Compressors  Cranes  Delivery Trucks Pedestrian Controlled  Dispensaries . 5. Passenger Carrying Vehicles.

automobile manufacturers must be encouraged to continuously .MOTOR INSURANCE  Drilling Rigs  Dumpers  Electric Trolleys or Tractors  Excavators  Fire brigade and Salvage Corps Vehicle  Footpath Rollers  Mobile Plant  Mobile Shops and Canteens  Oil And Petrol Transport Vehicles  Prison Vans  Road Rollers  Scrapers  Scientific Vans  Sheep Foot Tamping Roller  Spraying Plant  Tankers  Tower Wagons 2. limit on speed and other sophisticated traffic control measures Also.3 LOSS DUE TO AUTOMOBILE & IT’S PREVENTION The loss to the automobile insurance service providers is mainly in the form of claims arising from accidents can be minimised by providing better infrastructure in terms of roads.13 - .

there has been a demand for smaller. which frequently arise from driver’s negligence. 2) Redistribution of Losses and Expenses: The auto liability claims. o Medical Payments Coverage: . light-weight vehicles. which has resulted in increased severity of accidents and consequential losses 1) Restriction on Claims: Putting restrictions on the insured’s claims in the sense the fraudulent claims can be easily detected and effectively reduce the cost to the insurers Another way is to incentives the good clients by way of attractive rates and discounts. in most of the developed countries following types of coverage are available o Automobile Liability Insurance: Automobile Liability Insurance protects the insured against the loss arising from legal liability when his or her automobile injures someone or damages another’s property. can be tackled through redistributions In such a mechanism.MOTOR INSURANCE pursue enhancement of the safety measures in the vehicles Globally speaking. 3) Automobile Coverage: The coverage for automobiles differs in countries however. first the guilty party is to be determined and then the guilty party pays to the suffered party the amount of loss Such processes are generally channeled through the judicial system.14 - .

In India. absence of footpaths for pedestrians.MOTOR INSURANCE Automobile Medical Payments coverage reimburses the insured and members of the insider’s family for medical expenses that result from automobile accidents. Some of these hazards are discussed below: 1. the vehicles are subject to many hazards. Large potholes and . like potholes.1 NEED FOR AUTOMOBILE INSURANCE: In Indian conditions. which accentuate the need for automobile insurance. Footpaths: As footpaths are encroached by hawkers. The coverage is written under the two insuring agreements (also called as Comprehensive coverage) and Collusion — which indemnifies for collusion losses. o Physical Damages Insurance: Automobile Physical Damage Coverage insures against the loss of the policyholder’s own automobile. jaywalkers.15 - . The protection also applies to other occupants of the insured’s automobile. traffic management system. open manholes. If the other driver is at fault. the insured that carry collusion coverage has the option of proceeding against the other driver or collecting under his or under policy coverage. puddles. pedestrians have a tough time dodging between vehicles to reach the other end of the road. Physical damage coverage applies to the insured auto regardless of the default. the GIC offers two types of policy coverage. poor pedestrian management.3. increasing number of accidents etc. 2. untarred roads.

It would be a great burden if all these costs are borne by the individual. Reckless Driving: Besides. or even a truck.MOTOR INSURANCE manholes are a common sight and during the monsoon the situation can get only worse causing untold damage to your vehicle. vehicle insurance under such unsafe conditions is a must not only to cover risks towards the owner and the vehicle but also to cover the financial liability that may arise from an accident in which the other party is injured. Drunken Driving: Drunken driving is another very common feature. rash driving by youngsters is another of the dangerous realities that you should consider. Besides if the accident involves hospitalisation too. a two-wheeler. Majority of the youngsters drive recklessly caring little for the law. 2. The cost of repairs that you would have to pay to the other party in case of an accident may be exorbitant. Experts in stealing cars are well aware of the loopholes that can be exploited and accordingly have also been successful in manipulating with the chasis number of vehicles in order that they are not traced. Though drunken driving is a punishable offence the penalty has hardly proved to be a deterrent. Fire: Other than these there is also a danger of fire or theft of vehicle. the expenses can go through the roof. drunken driving is one of le major reasons for increase in accidents. 3. Theft: Cases of stolen cars are on the rise. Be it a car. 5. Therefore. causing serious accidents resulting in loss of life or limb. . 4.16 - .

The following liabilities can be covered in this policy: . No vehicle can be used without this minimum insurance cover. covers Act Liability. which is a compulsory requirement of the Motor Vehicles Act. or what is commonly known as Act Policy.MOTOR INSURANCE CHAPTER 3 TYPES OF MOTOR INSURANCE POLICIES The All India Motor Tariff governs motor insurance business in India.17 - . Form A. They are Form A and Form B. According to the Tariff. all classes of vehicles use two types of Policy Forms. Use without such insurance is a penal offence.

.. all the vehicles plying in the Territorial Limits of India must possess an ACT POLICY at all times. and towing disabled vehicles (only for commercial vehicles). Form A Policy As per the provisions of Motor Vehicles Act. by taking a Comprehensive Policy paying an additional premium. protection and removal costs. against bodily injury. As described earlier.18 - . or what is commonly known as Comprehensive Policy. in excess of Rs 6000/Liability towards employees under Common Law and Fatal Accidents Act.6000/. as per Motor Vehicle Act (as prevalent at the time of detection). The above losses or liabilities can be separately covered in conjunction with the liabilities covered under the Act Policy. over and above the liability under Workmen’s Compensation Act. Liability towards Third Party Property Damage to the extent of Rs. is an optional cover. Unlimited liability towards Bodily injury of passengers of the vehicle.only. this policy covers: 1. to the extent required under the Workmen’s Compensation Act. which takes care of the following additional losses and liabilities: • Loss or damage to the vehicle and its accessories and extra fittings. Third Party Property Damage / Bodily Injury (Fatal or Non fatal) when Insured vehicle is used in a public place. The violation is punishable with fine etc. Form B. Liability towards employees of the owner of the vehicle while traveling in or using it.MOTOR INSURANCE Unlimited liability towards Third Party bodily injury. • • Liability towards Third Party Property Damage. • Personal Accident Benefits for the owner. passengers and employees.

his legal heirs will be indemnified as in the case of the Insured. Such liability as above in respect of injury (fatal or non fatal) to any third party and damage to any third parties’ property. Subject to limit of liability laid down in the Motor Vehicle Act. Short period covers are also available at higher rates. All costs and expenses are incurred by the insured with Insurer’s written consent The compensation payable to Third Party for damage to its property (movable or fixed) is restricted to Rs. The period of the cover is generally a period of 12 months from the date of inception. the policy pays the insured’s legal liability for death/disability for third party.19 - ..MOTOR INSURANCE 2. The owners of the vehicle having insurable interest in it undertake this policy. 6. Insured’s legal liability. Third Party (A person other than Insured and the Insurer) who is injured/dies due to an accident with the Insured Vehicle. the amount of compensation adjudged by the Motor Accident Claims Tribunal is made good by the insurers and is payable to the legal heir of the deceased or the injured The amount of compensation is unlimited! has no preset limit.000 when an Employee (other than paid driver) is in the driving . and 3. 20. arising out of accident caused by or arising out of the use of the vehicle anywhere in India.0001. irrespective of the amount adjudged by the Motor Accident Claims Tribunal] J Court. In addition. However. as per Motor Vehicle Act. the liability for claimant’s cost is also met (Maximum Rs. In case of death of the Insured/Person entitled to compensation for a liability incurred under this policy. loss or damage to third party property Also. 6000/. all costs and expenses incurred with insurer’s written consent are paid.) unless additional premium for opting unlimited cover is paid.{Rupees Six Thousand Only). subject to the limitations of use of the vehicle provided that the Driver was holding a valid and effective driving license. This compensation limit can be increased to Unlimited by paying of an additional Premium at the time of taking insurance All costs and expenses incurred by Insured with Insurer’s written consent Claims arising out of and in the course of employment of a person in the employment of the Insured are compensated to the extent of Rs.

which offers some specific advantages.20 - . there are two Sections in the Comprehensive Policy. Section III is provided for commercial vehicles. Although the Act Policy Form A is identical for different classes of vehicles. Self-ignition and Lighting • Burglary. Strike. the comprehensive policy cover differs for various classes of vehicles. Loss or damage to a vehicle is included in the 'Own damage' form of insurance when the contingency is caused by the following perils:  SECTION 1 It concerns loss or damage to the vehicle and covers the risks like • Fire. Explosion. Additionally. For private cars and motorcycles. Malicious and Terrorism Damage . Comprehensive Insurance covers loss or damage to a vehicle due to 'own damage' apart from the third party insurance. when used contrary to limitation as to use. Form B Policy Form B is an optional cover. driven by a person other than the driver as stated in the clauses mentioned in the policy of insurance. Housebreaking and Theft • Riot.MOTOR INSURANCE seat When vehicle is used outside the geographical area.

for all classes of vehicles. i.500 Other Commercial Vehicles Rs 2 500 The owner/insured is also allowed to authorise repair expenses upto Rs 500/ per accident.  SECTION III . Typhoon. in respect of any one accident The limits for various class of vehicles are as follows Motor Cycles/Scooters Rs 300 Private Car & Taxis Rs 1. Hailstorm. Cyclone.MOTOR INSURANCE • Earthquake • Flood.  SECTION II It covers the liabilities towards third parties. inland waterway. the risk of frost damage is also covered From the above coverage. Hurricane. elevator or air. the insurance company bears the reasonable cost of protection and removal to the nearest repairer and the cost redelivery to the owner/insured subject to a maximum limit. strike. malicious and terrorism damage. earthquake and flood and storm. can be opted out of with a subsequent discount in premium In addition to these. rail.e. lift. liabilities of bodily injuries property damage. For motorcycles and commercial vehicles. the risks of riot. Storm.21 - . cover is also available for ‘Protection and Removal Costs’ and ‘Authorisation of Repairs’ If a motor vehicle is disabled as a result of loss or damage due to the perils mentioned above. Inundation.. Tempest. • Accidental External Means • Transit by road.

horsepower. model.MOTOR INSURANCE It is applicable to commercial vehicles. CHAPTER 4 PROCEDURES OF MOTOR INSURANCE The proposal form is completed for making proposal for motor insurance. if insurance company is also not liable for damages to the towed vehicle or any property being conveyed thereby. Identification of vehicles -registered number. etc. Further. shape and size. It covers the vehicle while it is being us for the purpose of [Towing Disabled Vehicles.22 - .’ This section covers Third Party Liability’ that the insured vehicle or the one being towed for reward/remuneration. The form is divided into three parts— I. .

However. the more will be the amount of premium. Additional premium is added to the basic premium on the basis of shape. value of the motor car. use. Rebate in premium is allowed if the insured has more than one car. the cover note is cancelled. The cover note is a certificate of insurance although it cannot be used as a proof of insurance in a court of law. size. Risk-information.  Rating the Motor Insurance : Since the motor insurance is subject to tariff.  Term of Insurance: The motor insurance policy is issued generally for one year. The car was under the personal use and care of the owner. equipments.. is a member of Automobile Association and there was no loss in the previous years. vehicles. III. type of policy got previously.  Issue of Policy: As soon as the proposal form is accepted. As soon as the policy is issued. The higher the risk. the tariff association determines basic premium. cover note is issued. etc. horsepower. Declaration -The declaration of true and full statement of the questions is made at the end of the policy. e. .g.Past insurance.23 - .MOTOR INSURANCE II. the policy can be issued for less than one year but the premium rate will be higher. the premium rate is three-fourths of annual premium of the policy issued for six months.

This is called ‘furlough concessions’. the proportionate share of premium is returned or the period of coverage is extended by the excess premium. Similarly the insured can replace another car under the same policy.MOTOR INSURANCE  Change of Vehicle: The insured vehicles can be disposed of along with the policy. damage to property.  Settlement of Claims: As soon as the damage occurs notice of that is given to the insurer The evidence or eyewitness should be placed to the insurer When-the insurer is satisfied with the notice and evidence. defense and prosecution.  Furlough Concessions: When risk is reduced. The policy will continue up to the unexpired period with the purchaser of the car.24 - .1 CLAIMS The process of claims in motor insurance is as follows: . he can issue claim form which is returned to the insured after completing it in all respects Personal injury is also made in connection with the personal injury. CHAPTER 5 CLAIMS AND SETTLEMENT 5. The term of policy will remain the same.

2 SETTLEMENT  The insurer examines the report and settlement is made in accordance with the recommendations of the report. to determine the cause and extent of the loss. business integrity of repairer or competence of repairer. the insurer settles the repairer’s bill. The documents required in a motor claim are as follows: Driving Licence .  The salvage available is required to be sold to the salvage buyer if so desired. The insurer reserves the right to ask for fresh estimates from another repairer if so desired.  After the bill of repairs is raised and the repairer obtains a note of satisfactory repair from the insured. Insurer’s own officers could be used to carry out the survey. at a pre-determined price.  a.25 - .\ 5.  The reason to ask for a fresh estimate may be moral hazard.  If there are no excesses. The usual practice is to authorise the motor repair garage to carry out the repairs as per the estimate submitted or with suitable amendments. the insured pays the repairer and then the claim is reimbursed to the insured. the repairer is asked to collect those straight from the insured. carries out an assessment.  In some case.  A surveyor.MOTOR INSURANCE  Register the claim: The insured is required to submit a detailed estimate of repairs from any repairer of his choice.

f. d. The aggrieved party has to file a claim within 6 months of the date of the accident.26 - . the final amount is usually arrived at as a compromise settlement.  If the salvaged vehicle in case of ‘total loss’ is beyond repair. If the market value of the vehicle is more than the insured value. the registration book and the keys are returned to the RTO authority. c. these are not paid until 3 or 4 months since the filing of the claim. g.MOTOR INSURANCE b. .  Third Party claims are covered under section 165 of the Motor Vehicles Act. If the surveyor finds that it is not feasible to repair the vehicle. he may recommend a ‘total loss’ claim.  Registration Book Fitness certificate (in case of commercial vehicles) Permit (in case of commercial vehicles) Police report (if any) Final bill from repairer Satisfaction note from the insured. The Tribunal plays a role in encouraging such a compromise.  In case of third party settlements where the liability is established. e. the settlement will be for the insured value. In case of total loss claims the surveyor’s recommendation is the most critical consideration. Usually. The insured is paid in cash and the salvage is taken over by the insurer.  Theft claims are also treated as total loss and claim has to be supported by a copy of First Information Report (FIR). Theft claims are settled only after the insurer has established the reasonable time and effort has gone into the investigation and recovery of the vehicle. which empowers the State Government to set up a tribunal to adjudicate on the third party claims.

1939 The government is concerned with the liability of motor vehicle owners who in course of the use of their vehicles cause accidents which result in death and/or injury to third parties. either: pedestrians or passengers traveling in the .MOTOR INSURANCE  Lok Adalats are established to handle cases where the Tribunal is unable to reach a settlement on the comprise basis.27 - . CHAPTER 6 MOTOR VEHICLE ACT.

MOTOR INSURANCE vehicles. 1988 provides that nc person shall use a motor vehicle except as a passenger. are given below in brief. the government though that the only way of ensuring victims of road accidents due to use of motor car in public places is to introduce compulsory insurance for the benefit of the third parties. It is found that. in a . 1939 was passed dealing with various aspects of the se of motor vehicle in public places.’ or allow any other person to use. The detailed provisions of the Motor Vehicle Act. 1. A person who owns a motor vehicle is definitely in a position to pay for insurance instead of keeping the risk on himself. medical benefits to which are added by the insurance companies to make the policy more useful and attractive. 1939 as far as compulsory insurance is concerned. To ensure automatic payment of premium for insurance policy and its renewal. sections were enacted for insuring third-party liability which is made compulsory. It is optional to take insurance for motor vehicle also. Therefore. In this Act.28 - . Necessity for Third-Party Insurance: Section 146 of the Motor Vehicle Act. In India. it is linked to the payment of road tax collected by the government. along with other benefits like personal: accident. the Motor Vehicle Act. motor vehicle owners and persons who drive the vehicle on their behalf quite often are not in a position to meet the liability arising out & death and injury and loss or damage the property.

contain a clause called “Avoidance of certain terms and rights of recovery” reading as under: “Nothing in this policy or any endorsement hereon shall affect the right of any person to recover an amount under or by virtue of the provision of the Motor Vehicles Act. It cannot ensure that such an award or decree results in actual payment. way or other place. Doing so will be a penal offense. the law had made it obligatory that no motor vehicle shall be used a unless third-party insurance is taken. does so at his risk’ “. “Public place” has been defined as a “road. whether a thoroughfare or not. which the company would not have been liable to pay but for the said provisions”. Any place where the public have a right to access is constituted as a “public place”. to which the public have a right to access and includes any place or stand. “It is to be noted that it is not only driving of the vehicle without insurance that will contravene the Act. 1994) to cast an additional duty that the owner of the vehicle carrying dangerous or hazardous goods shall also go in for a policy of insurance under the Public Liability Insurance Act. 1991. whosoever keeps it. at which passengers are picked up or set down by a stage carriage”. This section is amended (by the Amendment Act.MOTOR INSURANCE public place unless the vehicle is covered by a policy of insurance complying with the requirements of the Act. the use should be made in a “public place’ as defined earlier. street. because the person hold liable may be insolvent or may not have sufficient resources to meet the award.29 - . To overcome this situation. therefore. A court can only pass an award or decree. But the insured shall repay the company all sums paid by the company. The mere presence of a motor vehicle in a stationary condition in a public place will constitute the ‘use”. Secondly. “The motor vehicle can be likened to a wild animal. All motor policies. . Section 146 seeks to protect the members of public traveling in vehicles or those using the roads from the risks attendant upon the user of motor vehicles en the roads.

c. shall not be required to cover: • • Any contractual liability. Engaged in driving the vehicle. 1923 with respect to death or body injury to any such employee: a. or b.MOTOR INSURANCE 2. or II. The policy must. including the owner of the goods or his authorized representative carried in the carriage. . Section 147 of the Motor Vehicles Act. or Against death or body injury to any passenger of a public service vehicle. Engaged as conductor or ticket examiner in a public service vehicle. an insurer in whose case the requirements of the Insurance Act. cover liability arising under the Workmen’s Compensation Act. i. caused by or arising out of the use of the vehicle in a public place. Against any liability which may be incurred by the insured with respect to death of or body injury to any person. are complied with. however. however.. or Any liability with respect to death arising out of and in the course of employment of the employee of the insured. 1938. if it is a goods carriage. Against damage to any property of third-party.e. III. The Policy. or with respect to body injury sustained by such employee arising out of and in the course of his employment. Being carried in the vehicle. Requirement of Policies: The policy is required to be issued by an ‘authorized insurer’. 1938 requires that the policy of insurance must provide cover: I.30 - .

1988 provides that ‘lf. This section lays down that. insurance companies had a choice of refusal to transfer the certificate of insurance and issuing of new policy in the name of the new owner. if the driving history and other features of the risk become undesirable and adverse. then the certificate of insurance end the relative policy shall be automatically deemed to be transferred in favour of the new owner from the date of transfer of ownership of the vehicle. The Motor Vehicles (Amendment) Act. This right of refusal has been taken away in terms of the provisions of Section 157 of the new Act (19:38). Transfer of Certificate of Insurance : Under Section 103-A of the 199 Act.MOTOR INSURANCE 3.31 - . for making the necessary changes in the certificate of insurance and in the policy. then the insurer has to pay to the third party the amount decreed plus costs and interest awarded. a certificate of insurance complying with compulsory insurance provisions of the Act has been issued and judgment with respect to compulsory third-party liability is obtained against an insured person. The transferee should apply within 14 days from the date of transfer on the prescribed form to the insurer. Duty of Insurers to Satisfy Judgments : Section 149 of Motor Vehicles Act. and the insurer is obliged to make such changes in the said documents to effect title transfer of insurance. 4. transfers to another person the ownership of the motor vehicle with respect to which the insurance was taken. subject to the sum insured under the . where a person in whose favor a certificate of ins insurance has been issued. 1994 added an explanation in Section 157 (1) stating that such transfer shall include transfer of rights and liabilities of he said certificate of insurance and policy of insurance. The provisions of the Section are thus applicable not on1y in case of third risks but also to own damage risks.

However this section provides certain rights to the insurers before the commencement of the proceedings the insurers are entitled to receive notice through the court or the claims tribunals.MOTOR INSURANCE policy”.32 - . of the bringing of the proceedings or with respect to any judgment awarded so long as execution is stayed thereon pending an appeal. CHAPTER 7 . even though they may be entitled to avoid or cancel the policy or may have avoided or cancelled the policy. as the case may be. The important point to be noted here is that the insurers have to pay the third parties.

ICICI Lombard General Insurance Company received regulatory approvals to commence general insurance business in August 2001. insurance claims management and investment management. Lombard Canada Ltd. a group company of Fairfax Financial Holdings Limited. while Fairfax Financial Holdings is a diversified financial corporate engaged in general insurance. ICICI Bank is India's second largest bank. 7.33 - .MOTOR INSURANCE ICICI Lombard General Insurance Company Limited is a 74:26 joint venture between ICICI Bank Limited and the Canada based $ 26 billion Fairfax Financial Holdings Limited. reinsurance. is one of Canada's oldest property and casualty insurers.1 TYPES OF MOTOR INSURANCE POLICIES OFFERED BY ICICI LOMBARD .

etc.] Goods carrying [Truck. tanker. etc.] MIS-D {Which are for project purpose like construction} [Excavator. crane.] 1.MOTOR INSURANCE Motor Insurance in ICICI Lombard Commercial Vehicle {Business/comme rcial Purpose} Private Cars {Which is used for private purpose} Two Wheeler Passengers carrying [Taxi. dumper. yellow plated vehicle. TWO WHEELER INSURANCE . bus. lorry. etc.34 - .

explosion. self-ignition or lightning. elevator or air. landslide. flood. malicious act. storm. lift. riot. rockslide.MOTOR INSURANCE Two-wheeler riding calls for a constant accidents. The Indian Motor Tariff governs twowheeler insurance policy. inland waterway. typhoon. accident by external means.free. frost. third party liability.  Man made Calamities – Burglary. rail. hurricane. theft. injuries and damages. any damage in transit by road.  Personal accident cover – . terrorist activity.  Natural Calamities – Fire.  Policy Coverage: A composite policy that protects against an unfortunate accident. thereby making him/her ride stress. inundation. strike. cyclone. earthquake.35 - . It covers one for:  Loss or damage to the vehicle – The policy covers any loss or damage caused to the vehicle due to the following natural and manmade calamities. hailstorm. alertness from theft and policy Two-wheeler guarantees safety for ones vehicle and oneself. tempest.

)  Transfer your NCB: .  Third party legal liability – This protects one against legal liability arising due to accidental damages for   Any permanent injury/ death of a person Any damage caused to the property Key Benefits I. a No Claim Bonus (NCB) is offered on renewals. 1 lakh for individual owner-driver of the vehicle insured while traveling on. Package Policy for the Two Wheelers with Own Damage + Personal accident + Liability cover II. mounting or dismounting from the vehicle. One can also opt for a personal accident cover for passengers. This discount can go as high as 50%. One can avail of ICICI Lombard’s cashless claim facility at their Cashless Garage Network all across India. (NCB will only be allowed provided the policy is renewed within 90 days of the expiry date of the previous policy.MOTOR INSURANCE The motor insurance provides compulsory personal accident cover of Rs. No Claim Bonus: If the insured do not make a claim during the policy period.36 - .

MOTOR INSURANCE The insured can transfer full benefits of No Claim Bonus when he/she shifts his/her motor insurance policy from another company to ICICI Lombard. then he/she can get a discount of 2. The discount rate remains the same. 50.37 - . 2) CAR INSURANCE . provided the insured show evidence that he/she is entitled to No Claim Bonus from the previous motor insurance company. Evidence can be in form of:  Renewal notice or  Letter confirming the NCB entitlement from the previous insurer or  NCB declaration Additional discounts: If the insured is a member of a recognized Automobile Association in India he/she can avail a discount of 5% on the OD Premium subject to a maximum of Rs.5 % on the OD Premium to a maximum of Rs. 500.  Discount for Anti-theft Devices: In case one has installed ARAI approved anti theft device in he/her vehicle.

38 - . frost. theft. lift. riot. hurricane. terrorist activity. typhoon.  Man made Calamities Burglary. inland waterway. landslide. elevator or air. explosion. hailstorm. storm.MOTOR INSURANCE A comprehensive policy not only covers the individual against third party liability but also against damage to the vehicle. any damage in transit by road. accidental injury and much more. self-ignition or lightning. strike.  Loss or damage to the vehicle – The policy covers one against any loss or damage caused to the vehicle due to the following natural and man made calamities. flood. inundation. tempest.  Personal accident cover – . earthquake. cyclone. Policy Coverage The Indian Motor Tariff governs this Motor insurance Policy. rockslide. rail.  Natural Calamities Fire. malicious act. accident by external means.

One can also opt for a personal accident cover for passengers.)  Transfer your NCB: . mounting or dismounting from the car. (NCB will only be allowed provided the policy is renewed within 90 days of the expiry date of the previous policy. 2 lakhs for individual owner-driver of the vehicle insured while traveling in.500 in the event accidental damage or loss to the vehicle as specified under the policy. This discount can go as high as 50%. o One can claim towing charges up to Rs 1. Key Benefits o One can avail of ICICI Lombard’s cashless claim facility at their Cashless Garage Network all across India.39 - . a No Claim Bonus (NCB) is offered on renewals.  Third party legal liability – This protects you against legal liability arising due to accidental damages:   Any permanent injury/ death of a person Any damage caused to the property.MOTOR INSURANCE The motor insurance provides compulsory personal accident cover of Rs.  No Claim Bonus: If one does not make a claim during the policy period.

The discount rate remains the same.  Customize the insurance with additional covers: Electrical and/ or non-electrical items fitted to the vehicle can be insured separately.  Cover to the family: One can also opt for personal accident cover of up to Rs.  Discount for Anti-theft Devices: In case one has installed ARAI approved anti theft device in the vehicle. permitted by the concerned RTO.40 - .g. then he/she can get a discount of 2. family. provided the insured shows the evidence that he/she is entitled to No Claim Bonus from the previous motor insurance company.5 % on the OD Premium to a maximum of Rs. 500. Evidence can be in form of:    Renewal notice or Letter confirming the NCB entitlement from the previous insurer or NCB declaration  Additional discounts: If an individual is a member of a recognized Automobile Association in India then he/she can avail a discount of 5% on the OD Premium subject to a maximum of Rs. In case of vehicles fitted with bi-fuel system such as Petrol/ Diesel and CNG/ LPG.MOTOR INSURANCE One can transfer full benefits of No Claim Bonus when he/she shifts the motor insurance policy from another company to ICICI Lombard. relatives. 200. friends etc. 2 Lakhs for other unnamed passengers in the car. For e. . seat covers. music system. One need to specifically declare this in the proposal form. the CNG/LPG kit fitted to the vehicle is to be insured separately at an additional premium of 4% on the value of such kit. For example: fog lights.

A specialised cover for Goods-carrying Vehicles . The Indian Motor Tariff governs the Commercial Vehicle insurance Policy.MOTOR INSURANCE COMMERCIAL VEHICLE INSURANCE ICICI Lombard brings the Commercial Vehicle Insurance offering the most crucial cover of Third Party Liability (TPL).41 - .  Scope of Cover ICICI Lombard Commercial Vehicle insurance offers Third Party only cover for Goods-carrying Commercial vehicles. It defines Goods-carrying Commercial Vehicle as:  Public Carriers (other than three wheelers)  Private Carriers (other than three wheelers)  Goods Carrying Motorized Three Wheelers and Motorized Pedal Cycles. (Public Carriers)  Goods Carrying Motorized Three Wheelers and Motorized Pedal Cycles. One can now rest assured that his/her vehicle is covered and his/her business stays protected against accidental death or injury to third parties or passenger(s).be it Public or Private Carriers. (Private Carriers) It covers the insured for: .

Things exempted under this policy Under this policy. the insured is not covered against   Own Damage losses Any claim arising out of Personal Accident . occupant of other vehicles.  Need for Commercial Vehicle Insurance: Protect your Business – India is estimated to be the 2nd largest tractor manufacturer and the 5th largest commercial vehicle manufacturer in the world. and outsiders other than passengers.MOTOR INSURANCE   Personal Injury Property damage  Liability for death or injury to third parties: This means that the policyholder is insured against death or injury (caused by your vehicle) to pedestrians. To protect these vehicles. successful businesses today take up reliable Commercial Vehicle Insurance.42 - . Good for self-employed professionals/businessmen – Owning Commercial Vehicle Insurance is critical especially in the event that the insured is self-employed. This also ensures protection of the Corporate image at large which is of predominance during a crisis.

However. If the price of any electrical and / or electronic item installed in the vehicle is not included in the manufacturer's listed selling price. mutiny or nuclear risk Any employee(s) of the Insured other than the owner-driver of the goods-carrying vehicle  Damage to any bridge and/or way bridge and/or via duct and/or to any road and/or anything beneath by vibration or by the weight of the insured vehicle and/or load carried by the insured vehicle. one can avail cashless facility for the repair of the car in any of ICICI Lombard’s all India cashless garage. if the car is serviced in a garage outside the purview of ICICI Lombard’s network. IDV is calculated on the basis of the manufacturer's listed selling price of the vehicle (plus the listed price of any accessories) after deducting the depreciation for every year as per the schedule provided by the Indian Motor Tariff.1. . SUM INSURED The vehicles are insured at a fixed value called the Insured's Declared Value (IDV). 7.43 - . then the actual value (after depreciation) of this item can be added to the sum insured over and above the IDV. then one can claim reimbursement for the same.1 MOTOR CLAIM PROCEDURE In case of motor insurance claim.MOTOR INSURANCE  Third Party Legal Liability cover for commercial vehicles other than goodscarrying commercial vehicles  Any accidental loss damage and/or liability caused sustained or incurred outside the geographical area    Any claim arising out of any contractual liability Any accidental loss damage or liability due to war.

where cashless repair facility can be availed. if any  Jot down the names and contact details of witnesses. salvage etc informed by the CSM. DOCUMENTS REQUIRED .  Then one has to submit the copy of documents to the dealer / CSM and get verified with the originals. if any  Contact the ICICI Lombard’s 24X7 insurance help line number 1800 209 8888. Call centre representative who will provide the details of documents required for claim processing and also details of ICICI Lombard’s preferred garage. Get the claim number / reference number.44 - .  After completion of repair at the preferred garage the company will make payment of its share of the loss directly to the garage. bodily injury. After Registering the Claim  The customer service manager will contact the insured within 24 hours of registering the claim.MOTOR INSURANCE In Case of an Accident  One should note the number of the other vehicle involved in the accident.  File an FIR at the nearest police station in case of property damage.  The CSM will get the estimate for the repairs of the vehicle and give spot approval after assessment. theft and major damages.  The insured to pay the excess mentioned in the policy and depreciation.

. payment receipt (for cashless garage. 30 and Form 35 (if hypothecated)  Final report – A no trace report from the police saying that the vehicle cannot be located.MOTOR INSURANCE  For Accident Claims are as follows:  Claim form duly signed *  RC copy of the vehicle  Driving license copy  Policy copy (First two pages)  FIR on a case-to-case basis  Original estimate  Original repair invoice. 29.45 - . only repair invoice)  For Theft Claims are as follows:  Claim form duly signed  RC copy of the vehicle with all original keys  Driving license copy  Original policy copy  Original FIR copy  RTO transfer papers duly signed along with Form 28.  For Third Party Claims are as follows:  Claim form duly signed  Police FIR copy  Driving license copy  Policy copy.

On holidays these buses are also used for family occasions like picnics. marriages. etc.46 - . These are used for carrying factory employees and school children. small tour. 3. o PURPOSE: The 20 buses of this firm are used for dual purpose. It is one of the reputed firms of Chembur. Behind Ashish Theatre. o OFFICE : The office of Franeli Travels is at Henry Apts. Chembur. Mumbai – 400 074.MOTOR INSURANCE CHAPTER 8 FRANELI TRAVELS Fleet Owners of School & Factory Buses Franeli Travels is a 25 years old firm. . Shop No. It owns around 20 buses.

o INSURANCE PROCEDURE : Previously in the starting period the firm faced problems for getting insurance for their buses by New India Assurance Company. The damages to the buses are being compensated by the insurance companies on time. .47 - . o POLICY RENEWAL: As per the Motor Vehicle Act. o ACCIDENTS: The buses meet with minor accidents frequently. o INSURANCE COMPANY : The 20 buses of this firm are insured by two companies like New India Assurance and by Bajaj Allianz. after the inquiry is done by the insurance company. The CNG buses are insured by Bajaj Allianz and the rest by the New India Assurance Co. They were satisfied with the services of both the companies. According to him insurance brings him a kind of assurance that in today’s unpredictable and risky environment his business is safe.MOTOR INSURANCE o IMPORTANCE OF INSURANCE: According to the owner Mr. o CLAIM SETTLEMENT: According to the owner they never faced any problem in claim settlement. 1939 the policy has to be renewed at a period of one year and the firm also undertakes the same. Roland Patrao insurance of the buses is very important. But now due to high competition the firm can easily get its buses insured by both the companies.

Transport Contractor for Bulk LPG and All Type of Chemical Tanker’s Mahadik & Co. is one of the upcoming transport companies. Chembur Mumbai – 400 074. Opp Sita Estate. is located at A/5 Lok Vihar Society. o OFFICE: The office of Mahadik & Co.MOTOR INSURANCE CHAPTER 9 MAHADIK & CO. So he states that insuring a old vehicle is not important. o PURPOSE: As the firm has two tankers both are used for different purpose. The firm owns 2 tankers. o IMPORTANCE OF INSURANCE: According to the owner yes there is definitely importance of insurance but only for newly bought vehicle. 2006. Until the loan payment is taking place it is very important. But according to him the damage to the vehicle is many a times a small one.48 - . Another Tanker is used as Bulk Butimine Carrier. One of the tanker which is a Trailer Tanker is used to carry LPG Gas. It started its business from June. . Aziz Baug.

There are many rules and regulations and formalities to be taken care off. . Sameer Mahadik now a days it has become a tedious procedure to take an insurance policy from the public sector company. o TYPES OF POLICIES: The owner prefers a comprehensive and miscellaneous because the comprehensive policy ensures the security of his vehicles (tankers). As the company has taken miscellaneous policy both the drivers as well as cleaners are insured.49 - .MOTOR INSURANCE o INSURANCE: The company has insured both its tankers. o ACCIDENTS: The tankers of this firm never met with any of the accidents let it be a minor accident or be it a major accident. But according to him taking insurance policy from a private company was not at all tedious. o INSURANCE PROCEDURE: According to the owner Mr. The companies they prefer are New India Assurance & IFFCO-TOKIO. o DRIVERS INSURANCE: The company has two drivers and two cleaners.

many people are going for private companies and less weight age is given to Public companies. which will in turn benefit their motor insurance business and will also bring a reduction in their incurred losses. which brings a large business to insurance companies and is also said to be one of the most loss making class. Motor Insurance is the most important insurance tool for all owners. However.MOTOR INSURANCE CHAPTER 10 SUMMARY OF FIND Private Insurance companies are providing prominent services like issue of policy. The motor insurance consumers form the biggest segment of non-life insurance consumers in the country.50 - . Due to this. So it is recommended that all the insurance companies should give proper intimation to the policyholder of the policy renewal. . Motor insurance is a class of insurance. claim settlement and so on as compared to Public Sector companies. so insurance companies should come forward for increasing consumers’ awareness on insurance. customers will benefit from the policies only when they are aware of the details and renew their policy in time. To avoid this public sector companies should improve their services.

Motor insurance is an important tool providing financial security to the motor vehicle owners. All motor vehicles are required to be register with the road transport authorities and insured for third party liability. coupled with the liberalization policy adopted by the government. If the motor insurance is not made compulsory. Every vehicle before being driven on roads has to be compulsorily insured. The reason is principally the third party liability that could arise due to accidents and subsequent damage to innocent bystanders and people on the road. There has been a phenomenal rise in the motor accidents in the past few years. Much of these accidents are attributable to a sudden spurt in the number of vehicles.51 - . there is a strong possibility that some may not buy these voluntarily.MOTOR INSURANCE CHAPTER 11 CONCLUSION Motor insurance is one of the largest non-life insurance businesses in the world. The number of motor vehicles in India has seen a phenomenal increase in recent years due to the increasing income levels of the middle class. . This is because most of them think that the cost of accidents or losses will fall on others or they under estimate the risk of loss.

52 - .org www.finance.com SEARCH ENGINES Google Yahoo.indiabizclub.MOTOR INSURANCE CHAPTER 12 BIBLIOGRAPHY BOOKS General Insurance Volume I Modern Concepts of Insurance Insurance and Risk Management Insurance Products and Services Fundamentals of Insurance Insurance Management I AUTHOR CFAI M N Mishra I S PUBLISHED BY CFAI Books Chand Himalaya Publication House Tax Mann Himalaya Publication House New Age International Dr P K Gupta Indian Institute of Banking and Finance Dr P K Gupta Anand Ganguly WEBSITES www. Wikipedia .irdaindia.icicilombard.com www.