Motor Insurance

The motor insurance portfolio, falls under the miscellaneous department of insurance companies. It generates a major portion of total non-life business of companies operating in India. It was a tariff business. With the non-tariff regime introduced by IRDA now no tariff is applicable, but now companies can give discount on tariff rates.

The motor tariff has been revised from time to time keeping in view apart from other factors, the present market conditions, requirements of industry as a whole and insurance industry in particular and motor claims ratio. The current tariff has been revised with effect from 1st July 2002.

All the motor vehicles operating in India are the subject matter of insurance and for this purpose they are classified into three categories with further sub divisions according to the uses as under:

  1. Private cars
  2. Motor cycles and motor scooters
  3. Commercial vehicles

Commercial vehicles have been further classified according to their uses as under

1)                  Goods carrying vehicles

  1. a) Light motor vehicles
  2. b) Medium motor vehicles
  3. c) Heavy motor vehicles

2)                  Passenger carrying vehicles

  1. a) Motorised rickshaws
  2. b) Taxis
  3. c) Buses

3)                  Miscellaneous vehicles

  1. a) Ambulances
  2. b) Cranes
  3. c) Agricultural tractors
  4. d) Prison vans etc.

There can only be two types of losses which could arise on the above mentioned vehicles i.e.

  1. Loss or damage to the vehicle &
  2. Third party liability

 

Types of polices

For all classes of vehicles, there are two types of polices available under motor tariff i.e.

Liability only policy:

This policy covers third party liability for bodily injury and / or death and property damage. Personal accident cover for owner driver has also been included in the new tariff

Package policy:

This policy covers own damage losses to the vehicles in addition to the liability only cover as above.

 

Motor Vehicle Act

Motor vehicle act 1939 stipulates that no vehicle can run on road without liability only policy. Limited compensation was provided towards bodily injury/death. The act was amended in 1988, which made the above liability unlimited.

For proper understanding, let it be known that insured is 1st party, insurance company is 2nd party & every-body else falls under 3rd party including the passengers of private or commercial vehicles and also the employees and or workers.

The liability, in case of employees, is as per the Workman’s Compensation Act, 1923 & on payment of additional premium, it could be made wider. In such case the workmen has the option to claim either under WC Act or through MACT.

Under the WC Act the liability for death of the worker following accident is minimum Rs.80, 000/- & maximum Rs.4, 57, 080/- & for permanent total disablement it is Rs.90, 000/- & Rs.5, 48, 496/- respectively, where as it is unlimited under MACT.

As regards to the third party property damages, the statuary limit is Rs.6,000/- but under the new tariff w.e.f.1st July 2002 the insured has the option of increased TPPD limit of Rs.1 lakh for two wheelers & Rs.7.5 lakh for other vehicles.

The premium is in-built & if insured doesn’t want the increased limit; discount (ranging from Rs.50/- to Rs.200/- depending upon the type of vehicle) is allowed. In no case it could go below Rs.6000/- limit of MV Act. Mid-term change of TPPD limit is not allowed.

Rating

As explained earlier the motor vehicles are classified under three categories i.e. private cars, motorcycles and scooters and commercial vehicles. These vehicles are insured under two polices i.e. liability and or package polices.

For the purpose of rating there are four parameters for all the vehicles in case of package policies (liability premium being fixed according to class of vehicle) these parameters are:

1.Insured declared value;

It is the current dealer’s ex. show-room price less applicable depreciation as per schedule.

2.Cubic capacity (or passenger carrying capacity/gross vehicle weight);

As per registration certificate issued by the concerned RTO to determine the same

3.Age of the vehicle;

As per registration certificate (RC) & policy period.

4.Geographical zones;

Depending upon the office of registration (of the concerned vehicle), whole of India is divided under two zones:

Private cars , Two wheelers & Commercial vehicles rateable under section 4, C.1 &  C.4*  
Zone A Ahmedabad, Hyderabad, Bangalore, Pune, Delhi, Mumbai, Kolkata, Chennai  
Zone B Rest of India  
   
Commercial vehicles  
Zone A Delhi, Mumbai, Kolkata, Chennai  
Zone B All state capitals  
Zone C Rest of India  

Claims- Own damage

Own Damage: Losses to the vehicle may be either partial or total loss.

Partial loss: The insured will submit a detailed estimate of repairs from the workshop of his choice along with claim form. The insurance company appoints an independent surveyor or an in-house surveyor (if the loss is less than INR. 20,000), who would assess the loss and submit his report. The company will process the report, settle the loss and make payments on completion of formalities.

Total loss: Losses could be due to accident, fire or theft.

In case of accidents (including fire) where the vehicle is beyond the scope of economical repairs or where the liability exceeds 75% of the IDV, the claims are settled on total loss basis. The liability under such cases is the IDV of the vehicle. The insurance company would take the possession of the damaged vehicle for sale through auction (after getting it transferred in its name from the RTO concerned) & settle the claim, after completion of usual formalities.

For theft cases, there are certain additional formalities than that of accidental cases. The insured must lodge an F.I.R. and has to obtain untraced report from the police. Insured also needs to write to RTO and police station that having taken the claim from the insurance company, the vehicle should not be transferred without their permission & insurance company may be informed if the vehicle is traced out later.

The new tariff has provided compulsory excess on all vehicles. This excess has to be deducted before making the payment.

Third party claims

These claims are being dealt by advocates in the MACT. The tribunal awards the compensation based on the facts of the case & the insurance company deposits the award in the court. If the liability is not in dispute, these cases could be compromised in conciliation or Lok-Adalat.

Civil court has no jurisdiction in motor third party claims and there is no time limit to file case under the MACT (Motor Accident Claim Tribunal).

However, Sec.140 of the MV Act provides compensation to the victim under No-Fault Liability, which is Rs.50, 000/- for death & Rs.25, 000/- for if injury caused results into Permanent Total Disablement. M.A.C.T however has to pass an order for compensation. This award under no fault liability cannot be recovered but would be adjusted against the final award.

Hit & Run Sec. 163 of MV Act provides if some vehicle hit some person resulting death then Rs. 25000/- & in case of grievous injury Rs. 12500/- are payable under Solatium Fund.

 

Personal accident claim of owner driver

Claims under compulsory personal accident cover shall be applicable under both liability only and package policies. The owner of insured vehicle holding an ‘effective’ driving license is termed as owner-driver for the purposes of this section.

Cover is provided to the owner-driver whilst driving the vehicle including mounting into/ dismounting from or traveling in the insured vehicle as a co–driver.

The maximum liability under this cover is Rs.1 lakh for two wheelers & Rs.2 lakhs for other vehicles.-

 Cover

100% of CSI for death,

100% of CSI for loss of two limbs or sight of both eyes, or one limb and sight of one eye.

50% of CSI for loss of one limb or sight of one eye

100% of CSI for permanent total disablement from injuries other than named above.

 

DEPRECIATION FOR ARRIVING AT IDV

  DEP. FOR PARTIAL LOSS CLAIMS  
Upto 6 months 5%   Upto 6 months Nil  
6 months – 1 year 15%   6 months – 1 year 5%  
1 year – 2 years 20%   1 year – 2 years 10%  
2 years – 3 years 30%   2 years – 3 years 15%  
3 years – 4 years 40%   3 years – 4 years 25%  
4 years – 5 years 50%   4 years – 5 years 35%  
> 5 years & obsolete On consent   5 years – 10 years 40%  
SHORT PERIOD PREMIUM SCALE   Exceeding 10 years 50%  
Upto 1 month 20%   Rubber/ nylon/ Plastic 50%  
1 month – 2 months 30%   Fibre glass 30%  
2 months – 3 months 40%   Glass Nil  
3 months – 4 months 50%   # N C B – ALL VEHICLES  
4 months – 5 months 60%   1st claim free year 20%  
5 months – 6 months 70%   2 claim free years 25%  
6 months – 7 months 80%   3 claim free years 35%  
7 months – 8 months 90%   4 claim free years 45%  
Exceeding 8 months 100%   5 claim free years 50%  
COMPULSORY EXCESS   TP PD COVER (IN-BUILT)  
2 wheelers Rs.50   2 wheeler 1 lakh  
Pvt car/ Taxi/ 3w < 1500cc Rs.500   All others 7.5 lakhs  
Pvt car/ Taxi/ 3W > 1500cc Rs.1000   RESTRICTED TP PD COVER (DISC.)  
GCV PCV EXCESS   2 wheeler Discount Rs. 50  
< 7500 KG < 17 PASS Rs. 500   Pvt car Discount Rs. 100  
7500-16500 17 – 36 PASS Rs. 1000   3 wheeler/ taxi Discount Rs. 150  
>16500 KG > 36 PASS Rs. 1500   Commercial Discount Rs. 200  
COMPULSORY PA FOR OWNER DRIVER   RESTRICTIVE COVER FOR FIRE & OR THEFT  
VEHICLE CSI PREMIUM   Act + fire only Act only + 25 % of OD  
2 wheeler 1 lakh Rs. 50   Act + theft only Act only + 30 % of OD  
Pvt cars 2 lakh Rs. 100   Act + fire + theft Act only + 50 % of OD  
Comm. 2 lakh Rs. 100   # Valid for 90 days-general & 365 days-military persons  
N/A in case of Firm / Company or if No licence    

 

 
GEOGRAPHICAL ZONES    
PRIVATE CARS , TWO WHEELERS & COMMERCIAL VEHICLES RATEABLE UNDER SEC 4.C.1 AND C.4    
ZONE A AHMEDABAD, HYDERABAD, BANGALORE, PUNE, DELHI, MUMBAI, KOLKATTA, CHENNAI    
ZONE B REST OF INDIA    
COMMERCIAL VEHICLES EXCLUDING RATEABLE UNDER SEC 4.C.1 AND C.4    
ZONE A DELHI, MUMBAI, KOLKATTA, CHENNAI    
ZONE B ALL STATE CAPITALS    
ZONE C REST OF INDIA    
DISCOUNTS    
25% ON VINTAGE CARS, 33 1/3% ON VEH. CONFINED TO OWN PREMISES/ SITE ON O/D PREMIUM.    
50 % ON O/D PREMIUM FOR BLIND, HANDICAPPED, MENTALLY CHALLENGED VEHICLE.    
2.5% MAX RS.500 ON O/D PREMIUM FOR ANTI THEFT DEVICE APPROVED BY ARAI    
AAUI 5% MAX. RS.50 IN 2 WHEELER RS.200 IN CAR ON OWN DAMAGE PREMIUM    
EXTRAS/ ADD-ON COVERS    
FIBRE GLASS FUEL TANK RS100 FOR COMM.VEH. & RS 50 FOR OTHERS VEHICLES ON O/D PREMIUM.  
PA COVER RS.50 FOR PRIVATE CAR, RS.60 FOR COMMERCIAL VEHICLE & RS.70 FOR PILLION RIDER.    
LPG/ CNG EXTRA FITTED @ 4% ON O/D PREMIUM & RS.60 FOR LIABILITY ONLY PREMIUM.    
ELECTRICAL/ ELECTRONIC FITTINGS OTHER THAN IN-BUILT @ 4 % ON O/D PREMIUM    
60% ON O/D PREMIUM FOR DRIVING SCHOOL VEHICLES RECOGNISED BY RTO.    

 

SERVICE TAX EXTRA As APPLICABLE

 

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