Motor

MOTOR INSURANCE

Motor Insurance Policy
The most widely known general insurance product is Motor vehicle insurance .
It a the tariff product & implemented w.e.f 1-7-2002 by TAC.
Breach of the tariff NOT permitted at all.
The Tariff is mainly divided into three sections.
There are 48 General Regulations governing the application of the tariff. We will take up these regulations later during the presentation.
Motor Tariff is a big & exhaustive tariff.

This is a personal insurance contract and hence proposer has to fill up the proposal form.
There are two types of insurance
Liability Only policy and
Package policy
The Liability only policy is mandatory insurance requirement as per the Indian Motor Vehicle Act 1988. This policy insures the liability of the owner of the vehicle against the Third Party.
The Package policy covers the damage to the vehicle apart from the mandatory liability insurance.

The fixation of the liability is governed by the Motor Vehicle Act, The claim is lodged with MACT
The fixation of liability for the damage to the vehicle is decided by the INSURERS . Surveyors are the intermediary.
The policy names the perils against which the insurers assume the risk of damages or the loss to the vehicle.
There are 10 such named perils

Perils Covered
i. by fire explosion self ignition or lightning ;
ii. by burglary housebreaking or theft ;
iii. by riot and strike;
iv. by earthquake (fire and shock damage);
v. by flood typhoon hurricane storm tempest inundation cyclone hailstorm frost;
vi. by accidental external means;
vii. by malicious act;
viii.by terrorist activity;
ix. whilst in transit by road rail inland-waterway lift elevator or air;
x. by landslide rockslide

Motor Insurance
Motor Insurance includes Private Cars, Motorized Two Wheelers and Commercial Vehicles excluding vehicles running on rails.
All the vehicles having number plates have to be insured under the Motor Insurance. If the vehicle use is restricted to premises then CPM can be issued .
The Insurance is applicable for vehicles plying within the geographical limits of INDIA.
Geographical limits can be extended.

Valuation of the Motor Vehicle
Every asset under General Insurance should have an insurable value.
There has to be a method to value the asset.
There are three methods of valuation of the motor vehicle.
VINTAGE CARS
CLASSIC CARS
Insured declared value( IDV)

Valuation of the Motor Vehicle
Vintage Cars and Classic Cars have the definition of the tariff but it is the IDV method which should be very clear to all.
IDV is based on the manufacturers’ listed selling price of the brand and the model proposed for insurance with due adjustment for the depreciation .
The tariff provides for scale pf dep. for vehicles upto 5 years of age. For the vehicles aged >5 yrs. INSURERS & Insured decides the IDV.
There are minimum insured values as well.

Basis of rating
There are two parts for rating: For Act liability section & for Own Damage.
Once you know the value of the asset then in order to insure the same there should be a method to rate the risk to enable collection of premium.
Tariff provides for the method to rate the risk I.e the Motor Vehicle in this case.
Rating Factors : The premium rating is based on the following factors:
a) Insured’s Declared Value (IDV) of the vehicle (For determining IDV-Refer to GR.8)
b) Cubic Capacity
c) Geographical Zones
D) Age of the vehicle

Basis of rating - Contd
The four factors stated earlier takes up different meaning under the different section of the tariff.
The sections are logical sections and easy to understand.
Broadly you are aware that there are private cars and there are commercial vehicles.
The tariff has segmented them in the same fashion and hence we have:

Tariff for Private Car
Tariff for Motorised Two wheelers
Tariff for Commercial vehicles
The commercial vehicle tariff has six subsections which also provides rating for the vehicles moving out after being manufactured these are called motor trade risk policy.

Similarly there are ratings for vehicles > 10 yrs old.
1.936 %onIDV 1.848 %onIDV 1.760 %onIDV >5 Years &<10 Yrs 1.844 %onIDV 1. 760 %onIDV 1.676 %onIDV <5 Years >350cc >150cc & <350cc <150cc Age of Vehicle Cu. Cap. Cu. Cap. Cu. Cap. Zone B Zone B Zone B

Similarly there are ratings for vehicles > 10 yrs old.
1.973 %onIDV 1.883% onIDV 1.793 %onIDV >5 Years &<10 Yrs 1.879 %onIDV 1. 793 %onIDV 1.708 %onIDV <5 Years >350cc >150cc & <350cc <150cc Age of Vehicle Cu. Cap. Cu. Cap. Cu. Cap. Zone A Zone A Zone A

For the Liability Only cover the premium chargeable is
Rs. 700/- Exceeding 1500 cc Rs. 600/- Exceeding 1000cc but not exceeding 1500cc Rs. 500/- Not Exceeding 1000 cc Premium Cubic Cap. Of the Vehicle

How to arrive at IDV
For Vehicles beyond 5 yrs old and for obsolete models the Insurers & the insured decides the market value. In the event of a claim this value will be TL/CTL value payable.
50% Exceeding 4 year but not exceeding 5 years 40% Exceeding 3 year but not exceeding 4 years 30% Exceeding 2 year but not exceeding 3years 20% Exceeding 1 year but not exceeding 2 years 15% Exceeding 6 months but not exceeding 1 year 5% Not exceeding 6 months %age of dep. for fixing IDV Age of the vehicle

Apart from this four factor based rating additional premium is chargeable for additional facilities Viz.
For electronic/electrical fittings e.g Car Tape additional 4% is chargeable provided the fittings are additional fittings.
Vehicle with Bi-fuel system i.e. say with CNG/LPG system duly endorsed by RTA again 4% extra is chargeable.
If the vehicle is fitted with Fibre glass fuel tank then Rs. 50/- extra is to be charged.
Personal Accident policy: Different extra rates applied for different sum insured. For Owner Driver it is compulsory.

Basis of rating - DISCOUNTS
The most important point of rating are the discounts and the most important discount is the “ No Claim Bonus ” discount.
Other discounts and benefits
Voluntary deductibles discount
Automobile Association Membership discount
2.5% Discount for antitheft devices.
Vintage Car discount - 25%
50% for special vehicles for handicapped etc
33.33% discount for veh. Confined to own premises
For reducing TPPD limit - premium is reduced by certain amount

NCB
Even one claim and NCB starts afresh
NCB is granted only after full 12 months of policy
50% No claim during the preceding 5 consecutive years of insuran 45% No claim during the preceding 4 consecutive years of insuran 35% No claim during the preceding 3 consecutive years of insuran 25% No claim during the preceding 2 consecutive years of insuran. 20% No claim in 1 st year %age discount All Types of vehicles

Ratings – Other features
Rating parameters also encompass :
Coverage for the driver/cleaner/coolies as required by the MV Act 1988 - Rs.25/-.
Accidents to Soldiers/ Sailors/Airmen employed as Drivers by Defence officials in their private capacity – Rs. 100/-.
Liability to employees of the insured traveling in or driving the employer's vehicle.
A restricted cover like “Act+Theft” or “Act+Fire” or “Act+Fire&theft” is also permitted. The rates are provided in GR 45.
For a two wheeler “accessories” attract extra@3%.

Motor Insurance - Terminologies
Drivers clause
Limitation as to use clause
Endorsements – IMT
Deductibles
TPPD cover
Use confined to site (GR 35)
Transfer
Substitution
Double insurance
Duplicate Certificate
Cancellation
NCB

Drivers Clause
Any person including the insured

Provided that a person driving holds an effective driving license at the time of the accident and is not disqualified from holding or obtaining such a license.

Provided also that the person holding an effective Learner’s license may also drive the vehicle and that such a person satisfies the requirements of Rule 3 of the Central Motor Vehicles Rules, 1989.

Limitation as to the use Clause for the private car
The Policy covers use of the vehicle for any purpose other than

a) Hire or Reward
b) Carriage of goods (other than samples or personal luggage)
c) Organized racing
d) Pace making
e) Speed testing
f) Reliability Trials
g) Use in connection with Motor Trade
Similarly there are different wordings for different class of the vehicle.

IMT Endorsements
There are 65 endorsements signifying the benefits and the limitations of every extensions or deletions made under the policy and they actually define the coverage under the endorsements.
Example – Assuming that you insure a CRANE under motor policy and the cover is extended to include the risk of overturning then you have to use IMT47 to define the cover.
The legal liability to the paid driver of a commercial vehicle is as per the IMT40 wordings.
If the Car Tape is covered then the insurance is defined by IMT24 and hence has to be attached to the policy.

Deductibles:
The tariff provides for compulsory excess to be borne by the insured in the event of any loss or damage claimable under the policy. IMT 21 & 22 to be used.
TPPD:
The Act prescribes for two Act liabilities i.e TPPI & TPPD and whereas the TPPI is unlimited the TPPD is limited to Rs.6000/-. The tariff permits the TPPD coverage upto Rs. 7.5 Lacs as in built cover but for reducing the same to Rs.6000/- there are discounts prescribed.
Use confined to site/premises:
Many industrial motors/movable plants are used within the site only hence 33.33% discount is granted

Transfer:
When the vehicle is sold the policy is transferred to the new owner and transfer fee of Rs.50/- is collected to issue a new certificate of insurance.
Substitution :
When the owner buys a new vehicle then the new vehicle can be insured under the same policy by substituting the old with the new vehicle. This is done after ensuring that the old vehicle has the compulsory Liability Only insurance.
Double Insurance :
Occasionally vehicles are insured twice and tariff provides for refund of premium under one of the policy.

Motor Insurance - CLAIMS
The most tangible effect of the general insurance product is claim settlement.
Under the motor insurance policy most of the claims are arising out of vehicular accident and secondly because of theft. Pure Fire losses are rare.
All accidents do not result in third party claim but there is definitely an own damage claim. “Own Damage” means damage to the vehicle insured.
Third party claims are handled by the designated court called Motor Accident Claim Tribunal – MACT.
The quantum of the own damage claim have to be assessed and the job is done by the independent surveyor which in our case will be Cunningham Lindsay.
Motor claims are reimbursement based & hence repair &/or the replacement bills are to be collected for the assessed loss/damage.

Motor Insurance – Claims
There are mainly two types of losses or damages,
Total Loss(TL)/ Constructive total loss(CTL)
Partial loss
Total Loss means either the accidented vehicle is irreparable or that virtually the economical repair cost exceeds the IDV of the vehicle.
CTL means that economical repair liability is in excess of 75% of IDV and cost of retrieval or repair is factually more expensive than IDV. A comparison between the repair liability and IDV is necessarily made to arrive at the TL/CTL liability
The Partial Loss means the accidental vehicle can be economically repaired.
Surveyor is appointed when the loss is intimated and the estimate of loss is received.

Motor Insurance – Claims
Important points to be kept in mind:
The driver at the material time of accident should have an effective driving license.
The claimant should be the owner of the vehicle or the authorised employee of the company whose vehicle has met with an accident.
If there is any third party injury or damage then lodging an FIR with Police is must.
We pay for the cost of protection and removal of the vehicle from the site of accident to the place of repair hence the insured should act immediately for the minimisation of loss.
In case of theft of the vehicle FIR is must.

Motor

by sonakapur on Dec 20, 2009

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Motor — Presentation Transcript