1.

1 INTRODUCTION TO INSURANCE

The aim of all insurance is to compensate the owner against loss arising
from a variety of risks, which he anticipates, to his life, property and business.
Insurance is mainly of two types: life insurance and general insurance. General
insurance means Fire, Marine and Miscellaneous insurance which includes
insurance against burglary or theft, fidelity guarantee, insurance for employer's
liability, and insurance of motor vehicles, livestock and crops.

The Insurance Act, 1972 and the General Insurance Business

(Nationalisation) Act, 1972 govern Fire and Marine Insurance, while the Indian
Marine Insurance At, 1963 governs marine insurance in our country. These laws
contain provisions relating to the constitution, management and winding up of
insurance companies and the conduct of insurance business of all types. All
insurance business in India has been nationalised.

A Contract of insurance is a contract by which one party undertakes to make

good the loss of another, in consideration of a sum of money, on the happening of

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a specified event, e.g. Fire accident or death. Law recognises insurance as a system
of sharing risk too great to be borne by one individual.

Insurance in its basic form is defined as “ A contract between two parties

whereby one party called insurer undertakes in exchange for a fixed sum called
premiums, to pay the other party called insured a fixed amount of money on the
happening of a certain event."

In simple terms it is a contract between the person who buys Insurance and
an Insurance company who sold the Policy. By entering into contract the Insurance
company agrees to pay the Policy holder or his family members a predetermined
sum of money in case of any unfortunate event for a predetermined fixed sum
payable which is in normal term called Insurance Premiums.

Insurance is basically a protection against a financial loss which can arise on

the happening of an unexpected event. Insurance companies collect premiums to
provide for this protection. By paying a very small sum of money a person can
safeguard himself and his family financially from an unfortunate event.

For Example, if a person buys a Life Insurance Policy by paying a premium

to the Insurance company , the family members of insured person receive a fixed
compensation in case of any unfortunate event like death.

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 There are different kinds of Insurance Products available such as Life
Insurance, Vehicle Insurance, Home Insurance, Travel Insurance, Health or
Mediclaim Insurance etc.

1.2 MEANING OF MOTOR 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 or
damage to motor vehicles like theft fire or any accidental damage so as to provide
coverage for this motor insurance is taken.

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1.3 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. Now you must be wondering what is a third party liability?
Third party liability includes third party and liability incurred towards third party.

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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 the 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.
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 introduce by the Act on 1st July 1946. We in India follow the same practice as
that of U.K. Today we follow a set Tariff provided by Tariff Advisory Committee

5
where as now in U.K. Tariff business have been withdrawn. As Motor Vehicles
Act laid the provisions in 1939 and it required some amendments that were
st
implemented by the Motor Vehicles Act 1988 and it became effective from 1 July
1989 and that’s how the insurance concept has come to India.

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.

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1.4 FEATURES OF MOTOR INSURANCE

 Assured best deals on your Motor Insurance

 Fair and Faster claims settlement
 Discounts on back to back accident free years
 Instant online renewal and issuance of your Motor Policy
 Quick service on breakdown/accident with instant claim status updates
 24x7-customer assistance for all product queries and claims information.

OTHER SALIENT FEATURES

 For claims free experience, discount available on subsequent

Renewal
 Discount available if voluntary excess opted for Discount available
for membership with approved automobile association
 Discount available for installing approved anti-theft device
 Depreciation, for the parts needing replacement in the accident is defined

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1.5 FUNDAMENTAL PRINCIPLES OF INSURANCE

1) INDEMNITY :

A contract of insurance contained in a fire, marine, burglary or any other

policy (excepting life assurance and personal accident and sickness insurance) is a
contract of indemnity. This means that the insured, in case of loss against which
the policy has been issued, shall be paid the actual amount of loss not exceeding
the amount of the policy, i.e. he shall be fully indemnified. The object of every
contract of insurance is to place the insured in the same financial position, as
nearly as possible, after the loss, as if he loss had not taken place at all. It would be
against public policy to allow an insured to make a profit out of his loss or damage.

2) UTMOST GOOD FAITH:

Since insurance shifts risk from one party to another, it is essential that there
must be utmost good faith and mutual confidence between the insured and the
insurer. In a contract of insurance the insured knows more about the subject matter
of the contract than the insurer. Consequently, he is duty bound to disclose
accurately all material facts and nothing should be withheld or concealed. Any fact

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is material, which goes to the root of the contract of insurance and has a bearing on
the risk involved. It is only when the insurer knows the whole truth that he is in a
position to judge (a) whether he should accept the risk
and (b) what premium he should charge.

If that were so, the insured might be tempted to bring about the event insured
against in order to get money.

3) INSURABLE INTEREST:

A contract of insurance effected without insurable interest is void. It means

that the insured must have an actual pecuniary interest and not a mere anxiety or
sentimental interest in the subject matter of the insurance. The insured must be so
situated with regard to the thing insured that he would have benefit by its existence
and loss from its destruction. The owner of a ship run a risk of losing his ship, the
charterer of the ship runs a risk of losing his freight and the owner of the cargo
incurs the risk of losing his goods and profit. So, all these persons have something
at stake and all of them have insurable interest. It is the existence of insurable
interest in a contract of insurance, which distinguishes it from a mere watering
agreement.

4) CAUSA PROXIMA:

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 The rule of causa proxima means that the cause of the loss must be
proximate or immediate and not remote. If the proximate cause of the loss is a peril
insured against, the insured can recover. When a loss has been brought about by
two or more causes, the question arises as to which is the causa proxima, although
the result could not have happened without the remote cause. But if the loss is
brought about by any cause attributable to the misconduct of the insured, the
insurer is not liable.

5) RISK:

In a contract of insurance the insurer undertakes to protect the insured from a

specified loss and the insurer receive a premium for running the risk of such loss.
Thus, risk must attach to a policy.

6) MITIGATION OF LOSS:

In the event of some mishap to the insured property, the insured must take
all necessary steps to mitigate or minimize the loss, just as any prudent person
would do in those circumstances. If he does not do so, the insurer can avoid the
payment of loss attributable to his negligence. But it must be remembered that
though the insured is bound to do his best for his insurer, he is, not bound to do so
at the risk of his life.

7) SUBROGATION:

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 The doctrine of subrogation is a corollary to the principle of indemnity and
applies only to fire and marine insurance. According to it, when an insured has
received full indemnity in respect of his loss, all rights and remedies which he has
against third person will pass on to the insurer and will be exercised for his benefit
until he (the insurer) recoups the amount he has paid under the policy. It must be
clarified here that the insurer's right of subrogation arises only when he has paid
for the loss for which he is liable under the policy and this right extend only to the
rights and remedies available to the insured in respect of the thing to which the
contract of insurance relates.

8) CONTRIBUTION:

Where there are two or more insurance on one risk, the principle of
contribution comes into play. The aim of contribution is to distribute the actual
amount of loss among the different insurers who are liable for the same risk under
different policies in respect of the same subject matter. Any one insurer may pay to
the insured the full amount of the loss covered by the policy and then become
entitled to contribution from his co-insurers in proportion to the amount which
each has undertaken to pay in case of loss of the same subject-matter.

1.6 TYPES OF MOTOR INSURANCES POLICIES

The All India Motor Tariff governs motor insurance business in India.
According to the Tariff, all classes of vehicles use two types of policy Forms. They
are Form A and Form B. Form A, or what is commonly known as Act Policy,
covers Act Liability, which is a compulsory requirement of the Motor Vehicles

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Act. No vehicle can be used without this minimum insurance cover. Use without
such insurance is a penal offence. The following liabilities can be covered in this
policy:
 Unlimited Liability towards Third Party bodily injury;
 Liability towards Third Party Property Damage to the extent of Rs. 6000/- only;
 Unlimited liability towards bodily injury of passengers of the vehicle;
 Liability towards employees of the owner of the vehicle while traveling in or
using it, against bodily injury, to the extent required under the Workmen’s
Compensation Act.

Form B, or what is commonly known as Comprehensive Policy, is an optional

cover, which takes care of the following additional losses and liabilities:
 Loss or damages to the vehicle and its accessories and extra fittings protection
and removal costs, and towing disabled vehicles (only for commercial
vehicles).
 Liability towards Third Party Property Damage, in excess of Rs.6000/-.
 Liability towards employees under Common Law and Fatal Accidents Act, over
and above the liability under Workmen’s Compensation Act.
 Personal Accident Benefits for the owner, passengers and employees.

The above or liabilities can be separately covered in conjunction with the liabilities
covered under the Act Policy, by taking a Comprehensive Policy paying an
additional premium.

FORM ‘A’ POLICY

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 As per the provisions of Motor Vehicles Act, all the vehicles plying in the
Territorial Limits of India must possess an ACT POLICY at all times. The
violation is punishable with fine etc., as per Motor Vehicles Act (as prevalent at
the time of detection). As described earlier, this policy covers:
1. Third Party Property Damage / Bodily Injury (Fatal or Non-fatal) when Insured
vehicle is used in a public place,
2. Insured’s legal liability, as per Motor Vehicle Act, arising out of accident
caused by or arising out of the use of the vehicle anywhere in India, and
3. Such liability as above in respect if injury (fatal or non-fatal) to any third party
and damage to any third parties’ property.

The owners of the vehicle having insurable interest in it undertake this policy.
The period of the cover is generally a period of 12 months from the date of
inception. However, Short period covers are also available at higher rates. Subject
to limit of liability laid down in the Motor Vehicle Act, the policy pays the
insured’s legal liability for death/disability for third party, loss or damage to third
party property. Also, the liability for claimant’s cost is also met (Maximum Rs.
6000/-) unless additional premium for opting unlimited cover is paid. In addition,
all costs and expenses incurred with insurer’s written consent are paid.

In case of death of the insured/person entitled to compensation for a liability

incurred under this policy, his legal heirs will be indemnified as in the case of the
Insured, subject to the limitations of use of the vehicle provided that the Driver
was holding a valid and effective driving license.

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 Third Party (A person other than Insured and the Insurer) who is injured/dies
due to an accident with the Insured, 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.

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
(moveable or fixed) is restricted to Rs. 6000/- {Rupees Six Thousand Only},
irrespective of the amount adjudged by the Motor Accident Claims Tribunal /
court. 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 a person of the Insured are compensated to the extent of Rs. 20,000
when an Employee (other than paid driver) is in the driving seat.

When vehicle is used outside the geographical area, when used contrary to
limitation as to use, driven by a person other than the driver as stated in the clauses
mentioned in the policy of insurance.

FORM ‘B’POLICY

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 Form B is an optional cover, which offers some specific advantages.
Although the Act Policy Form A is identical for different classes of vehicles, the
comprehensive policy cover differs for various classes of vehicles; the
comprehensive policy cover differs for various classes of vehicles. For private cars
and motorcycles, there are two sections in the comprehensive Policy. Additionally,
Section III is provided for commercial vehicles.

I. It concerns loss or damage to the vehicle and covers the risk like:
 Fire, Explosion, Self-ignition and Lighting
 Burglary, Housebreaking and Theft
 Riot, Strike, Malicious and terrorism Damage
 Earthquake
 Flood, Typhoon, Hurricane, Storm, Tempest, Inundation, Cyclone, Hailstorm
 Accidental External Means
 Transit by road, rail, inland waterway, lift, elevator or air.

For motorcycles and commercial vehicles, the risk of frost damage is also
covered. From the above coverage, for all classes of vehicles, the risks of riot,
strike, malicious and terrorism damage, earthquake and flood and storm; can be
opted out of with a consequent discount in premium. In addition to these, 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, the insurance company bears the reasonable cost of protection
and removal to the nearest repairer and the cost of redelivery to the owner /insured

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subject to a maximum limit, in respect of any one accident. The limit for various
class of vehicle are as follows:

Motor Cycles / Scooters: Rs. 300

Private Car& Taxis Rs. 1,500
Other Commercial Vehicles Rs. 2,500

The owner / insured is also allowed to authorize repair expenses upto Rs. 500 /- per
accident.

II. It covers the liability towards third parties, i.e., liabilities of bodily injuries
and property damage.

III. It is applicable to commercial vehicles. It covers the vehicle while it is being

used for the purpose of [Towing Disabled Vehicles.’ This section covers
Third Party Liabilities that the insured vehicle or the one being towed for
reward / remuneration. Further, the insurance company is also not liable for
damages to the towed vehicle or any property being conveyed thereby.

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1.6.1 CALCULATION OF PREMIUMS

In case of Comprehensive Insurance Cover, for the purpose of premium,

vehicles are categorized as follows:

a) PRIVATE CAR

This is used for personal purpose. The premium is computed on the following
basis:
 Geographically area of use and cubic capacity
 Value of the vehicle.
Accessories are to be specified separately under electrical and non-electrical items.

b) TWO-WHEELER

It is used for personal only. Premium is calculated on cubic capacity and

value of vehicle. Accessories are to be specified. Theft of accessories is not
covered, unless the vehicle is stolen at the same time.

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 c) COMMERCIAL VEHICLE

This is a vehicle used for hire and is classified as follows:

 Goods-carrying commercial vehicle: In this case premium is calculated on
carrying capacity-gross vehicle weight and value of the vehicle. Accessories
extra, as specified.
 Passenger-carrying commercial vehicle: In this case premium is calculated on
carrying capacity of the vehicle-number of passengers and value of the vehicle.
Accessories extra, as specified.

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1.7 NEED FOR AUTOMOBILE INSURANCE

In Indian conditions, the vehicles are subject to many hazards like potholes,
open manholes, puddles, untarred roads, traffic management system, poor
pedestrian management, and absence of footpaths for pedestrians, jaywalkers,
increasing number of accidents etc. which accentuate the need for automobile
insurance. Some of these hazards are discussed below:

i) FOOTPATHS

As footpaths are encroached by hawker, pedestrians have a tough time dodging

vehicles to reach the other end of the road. Large potholes and manholes are a
common sight and during the monsoon the situation can get only worse causing
untold damage to your vehicle.

ii) DRUNKEN DRIVING

Drunken driving is another very common feature. Be it a car, a two-

wheeler, or even a truck, drunken driving is one of the major reasons for increase

19
in accidents. Through drunken driving is a punishable offence the penalty has
hardly proved to be a deterrent.

iii) RECKLESS DRIVING

Besides, rash driving by youngsters is another of the dangerous realities that

you should consider. Majority of the youngsters drive recklessly caring little for
the law, causing serious accidents resulting in loss of life or limb.

iv) THEFT

Cases of stolen cars are on the rise. Experts in stealing cars are well aware of
the loopholes that can be exploited and accordingly have also been successful I
manipulating with the chasis number of vehicles in order that they are not traced.

v) FIRE

Other than these there is also a danger of fire or theft of vehicle. Therefore,
vehicle insurance under such unsafe conditions is a must not only to cover the
financial liability that may arise from an accident in which the other party is
injured. The cost of repairs that you would have to pay to the other party in case of

20
an accident may be exorbitant. Besides if the accident involves hospitalization too,
the expenses can go through the roof. It would be a great burden if all these costs
are borne by the individual. The insurance company can indemnify against such
losses and the financial liability arising thereof.

If the auto insurance is not made compulsory, there is a strong possibility

that some may not buy these voluntarily. This is because most of them think that
the cost of accidents or losses will fall on others or they underestimate the risk the
loss.” Economic arguments for compulsory insurance laws in these people to
consider more of the costs of their actions when deciding whether to drive, what
kind of car to buy, how safely to drive, and so an.”

The economic rationale for insurance may be that it affects people’s decision
to drive. Some people are likely to forgive driving if the insurance is made
compulsory insurance is made compulsory since it acts as a financial disincentive.
Another could be that it encourages people to drive safely, which may reduce of
risk. Those who criticize compulsory auto insurance plead that it results in
lowering the disposable income or it results in lowering the disposable income or it
results in a shift of income from lower group to the higher group. for dubious
advantages.

1.8 BENEFITS OF MOTOR INSURANCE.

 Now Buy Online facility Save on your Motor Insurance policy.

 Cashless claims at over 1500 preferred workshops pan India, 75% on

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 account payment when cashless facility is not available.
 You can transfer your existing No Claim Bonus from any Insurance provider
ranging from 20% - 50%
 0% EMI option available on payment.
 Instant claims assistance and instant updates on your claim status on sms
though
our 24x7 call centers are available.
 Towing facility in an event of a breakdown/accident
 24/7 service by phone or online-even on holidays
 Huge savings with a comprehensive coverage for your vehicle
 Preferred workshops give you access to hassle free inspection, high service
standards and cashless settlement of claims in event of an accident/breakdown
 Instant online policy renewal and issuance in just 4 easy steps that allows you to
have a peace of mind for another year.
 With 24x7 assistance, you can be sure we will be there for you whenever you
need

BENEFITS OF COMPREHENSIVE POLICY COVER- AN

ILLUSTRATION

Mr. Tom has an Act Only policy covering his private car. He employs a paid
driver. While driving the vehicle, after dropping Mr. Tom at his office, the vehicle
collides with a truck and the driver dies on the spot. Being an old car, Mr. Tom had
nothing much to lose and that is why he had not taken a Comprehensive Policy.
However, the family of the driver lost their breadwinner.

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As an employer, Mr. Tom is liable to compensate for the driver, since he was
driving the vehicle in course of employment. The Motor Vehicles Act, 1988 makes
it compulsory to insure liabilities under Workmen’s Compensation Act.

According, the legal heir of the deceased driver filed an application to the
labour Commissioner and an Award of Rs. 1, 50,000 was passed against the
employer. Mr. Tom, equipped with an Act Policy, approached the insurance
company, who in turn satisfied the Award. The legal heir of the driver received the
compensation from the labour court soon after and everyone was happy.

The liability for compensation as per the Workmen’s Compensation Act,

depends on the wages of the employee and his age, and represents mainly the loss
of earnings. However, other losses representing mental pain and agony for the
family, loss of consortium, future expenses on dependents and loss of prospective
earnings are not accommodated in this compensation.

The legal heir of the driver, in the instant case then approached the Motor
Accident Claims Tribunal, demanding a compensation of Rs. 1, 00,000 towards
these losses. The tribunal passed an award of Rs. 50,000, found reasonable as per
provisions of Common Law and Fatal Accidents Act. Mr. Tom had an Act Policy,
which did not cover this liability, and he saddled with the responsibility of
satisfying the court Order. You can imagine the financial burden he had to bear.
Had he taken to face this difficulty. The insurance company would have paid this
additional amount of compensation too. It is, therefore, always beneficial and
advisable to take a comprehensive policy covering these liabilities.

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EXCLUSIONS TO THE COMPREHENSIVE INSURANCE
COVER

This insurance does not cover loss or damage caused due to:

1. Driver being under intoxication

2. Vehicle being driven by a person not holding an effective,
valid licence. It also does not cover:
3. Damage to tyres (unless the vehicle is also damaged).
4. Wear and tear, mechanical breakdown.

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1.9 MOTOR INSURANCE CLAIMS

1.9.1 OWN DAMAGE CLAIMS FOR MOTOR INSURANCE.

Documents:-

Following Documents generally required for settlement of motor claims.

However depending on the merits of the case, a particular document may not be an
alternate document could be used to serve the purpose of the insurer.

1. Claim form required to be completed.

2. Registration Certificate: the details usually verified from the RC can instead
be obtained from purchase details of the vehicle if the circumstances so warrant.
3. Driving License: as per policy condition the driver is required to hold an
effective driving license both in terms of the period validity and the class of
vehicle that is being driven at the time of the accident. The MV Act provides
for a grace period of 30 days after expiry of a license during which period the
license may be accepted as effective, provided the holder has not been qualified
from holding a license. For loss sustained by parked vehicles, driving license
may be relevant.

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4. Load Challan/Trip Sheet: to verify that the load carried was within the
permissible limits and trip sheet giving details of number of passengers carried
in the vehicle.
5. Fitness Certificate: the fitness certificate indicates the roadworthiness of a
commercial vehicle.
6. Report to police: a copy of the FIR and Panchanama is required wherever third
parties are involved in an accident.
7. Survey Report: surveyor ascertains the damage, assess the quantum of payable
claim, verify vehicular documents and confirm that the loss/damage being
claimed for is in conformity with the narration of the accident. Wherever
replacement of p [arts is allowed surveyors with the narration of the accident.
Wherever replacement of parts is allowed surveyors physically verify serial
numbers as appearing on major parts, which carry such numbers.

1.9.2 PROCEDURE:

 In order to proceed for claim, the insured immediately informs the insurer.
 The policy documents are verified to ensure that the policy is force and the loss
is entered in the claims register and the claim form is issue to the insured to be
completed and returned.
 The insurer, immediately on receipt of intimation of loss, either in writing or
over telephone, a surveyor is appointed based on the estimate.
 In case of major accidents, the insured would be asked to arrange for
photographs of the vehicle at the spot of the accident, showing all the external
damages and the number. Plate of the vehicle. The photo expenses are to be

26
 reimbursed upto Rs. 500. Alternatively, the insured may inform the nearest
office of the insurer to arrange for such photographs.
 The survey report is examined and settlement is done based on surveyor’s
recommendations.
 If reinspection after repair is considered necessary it may be conducted by the
same surveyor who has assessed the loss.
 Conventionally, the payment is made to the repairer directly.
 If for any reason, to be specified, the driving license cannot be produced, the
claim may be considered only on the basis on non-standard basis. However for
settlement of such claims the authority is not endorsed for tourist taxis, since,
different practices prevail in different states, it is on the basis of the practice.
Prevailing in the state where the accident occurs and this will be decided by a
manager and above in the RO.
 The repairers are bound to keep aside the value of salvage and if the salvage is
desired to be retained, the value is deducted from the claim bill.

1.9.3 PARTIAL LOSS CLAIMS FOR MOTOR INSURANCE.

1. Submission of bills/cash can be dispensed with for claims upto

Rs. 50,000 in respect of private cars and two wheelers only, subject to.
 The survey report correctly indicating the cost of parts allowed for replacement
 Claims being settled on the basis of a report of reinspection after repairs by the
surveyors certifying that the repairs and replacements have to be obtained and
verified.

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2. If surveyor confirm replacement of the engine and chassis if
allowed for replacement and indicates the new numbers,
claims may be settled whilst simultaneously advising the insured that.
 As per the provision of the Motor Vehicles Act, the new numbers have to be
incorporated in the RC book.
 Insurance company be informed about the incorporation of the new numbers in
the RC book for endorsing on the policy document to facilitate settlement of
future claims.
 Where the vehicle is totally damaged or when the net cost of repairs is almost
close to the market value of the IEV the claim could be considered to be a total
loss. Such total loss claims should be encouraged on net of salvage basis i.e.,
salvage being retained by the insured and an appropriate amount towards
salvage value as determined by the surveyor in consultation with the company
be deducted from the total loss amount.
 However, if the insured to retain the salvage, arrangements should be made for
the safe custody is informed vehicle to prevent further loss or damage. The
RTO should be informed by Registered AD post. An inventory on the major
parts should also be taken for its disposal as per company’s guidelines for
disposal of salvage.

1.9.4 THEFT CLAIMS FOR MOTOR INSURANCE.

1. Partial Loss due to Theft: Theft of parts/ accessories from a vehicle should be
reported to the police immediately by the insured. If parts are found missing or

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 changed after recovery of stolen vehicle this be recorded in Panchanama /
recovery memo. Final police investigation report will also be required.
However, if the competent authority is satisfied about the genuineness of the
loss, final investigation report may be waived provided the insured sends a
registered AD letter to the SP/ACP requesting that the insurer should be
informed of any recovery.
2. Total Loss due to Theft: Unless claims setting authority is fully satisfied,
investigation of the theft to be arranged by an investigator who may be
appointed with specific terms of reference.
3. The following documents should be collected from the insured in addition to a
certified copy of the FIR, for considering “on account” payment of the
admissible claim after expiry of 90 days from the date of loss.
 Surrender of the Registration Book and the Tax Book to the insurer duly
transferred in the name of the insurers. The RTO is to be informed about the
theft of the vehicle and this should be entered in Tax Book so that further tax
will not accrue.
 Letter of indemnity and subrogation.
 Ignition keys of the vehicle.
 Certificate of insurance and the original insurance policy, if not stolen with the
vehicle.
 Specially worded discharge voucher.
4. The balance payment may be released on receipt of the Final Police
Investigation Report or on expiry of a suitable waiting period from the date of
the “on account” payment, after obtaining the discharge voucher in full and
final settlement of the claim.

29
5. the police and the registration authorities and the NCRB should be notified in
writing about disposal of the claim on “total loss” basis following theft of the
vehicle. They should be requested to advise from the police regarding recovery
of the vehicle, necessary steps for taking possession of the vehicle from the
police custody should be taken and, if necessary, an advocate should be
appointed for filing recovery application in the court.
6. Municipal Authorities, where applicable and the RTO should be advised by
registered letter with Acknowledgement. Due to record ‘non use’ of the vehicle
on account of theft and about the cancellation of the Insurance Certificate.
7. If the vehicle is recovered subsequently, the insured will have the option to
repay the claim amount already paid and retain the recovered vehicle. If the
vehicle is found damaged, the insured will be indemnified against loss of
damage. The insured should be advised to obtain recovery memo from the
police and to get the vehicle surveyed at the police station before taking
delivery, as mentioned under loss theft claims.
8. In cases of criminal breach of trust each case should be dealt with an individual
basis depending upon facts of each case and subject to legal opinion.

1.9.5 THIRD PARTY BODILY INJURY CLAIMS: FATAL AND NON

FATALFOR MOTOR INSURANCE.

1. Intimation of Claim: Intimation about an accident resulting into third party

claim is received through various sources:
 Insured directly or by mention in passing whilst lodging own damage claim.

30
 Claimant
 MACT/Courts by notice
 Through accident report from police in Form 54 prescribed under Central Motor
Vehicles Rules, 1389.

2. Investigation: Investigation about the accident to collect the relevant data to

quantify reasonable and just compensation as per the specified formats in
respect of all third party claims is mandatory. The companies should ensure that
this investigation helps the insurance company in finalizing out of court
settlement at the earliest.

3. Appointment of Advocate: On receipt of notice from the MACT a competent

advocate from the panel may be appointed if necessary. The following relevant
documents and information should be given to him/her immediately to enable
him /her to draft written statement (w/s)on behalf of the company and ensure
that the proper defense is taken where necessary and no frivolous statements are
made.

4. Policy Copy: Duly certified true copy of the complete policy with the relevant
clauses and endorsements as actually attached with the original issued covering
the vehicle at the material time of accident.

5. Driving license: In case it has been observed that driver was not duly licensed
the necessary information should be given to the advocate. Through under
Section 149(2) of the MV Act, 1988, Insurance Company has no liability if the

31
 driver is not duly license rests on insurance company and this obligation is
required to be discharged fully to the satisfaction of the court.

6. Compliance Policy Conditions: If a breach of a specific condition has been

observed it should be brought to a notice of the Advocate to enable proper
defense if possible.

7. a) Written statement on behalf of the insurance company incorporating all

defenses available as enumerated under Section 149 of MV Act should be
promptly filed.
b) Wherever necessary when there is collusion between the insured and the
claimants or when the insured fails to defend claim, the company’s advocate must
be instructed to obtain the MACT’s permission under Section 170 of the MV Act
to defend the claim on merits.

8. Payment of No Fault Liability Claims: If Liability under affected policy is

established after taking into consideration the foregoing defenses, company
should take immediate steps to deposit No Faulty Liability amount as per
Section 140 of the MV Act, 1988.

9. payment of Fault Liability Claims: Companies may initiate action to settle

such claims either through
 Jald Rahat Yojna
 Lok Adalats
 Direct negotiation with the claimant through DICC & RICC.

32
10.Jald Rahat Yojna: Section 152 of MV Act, 1988 authorizes insurance
company to settle motor third party non-fatal bodily injury claims where
claimant is an adult without claimants taking recourse to MACTs. Industry has
already Launched the Scheme since 1991.

1.9.6 GUIDELINES FOR PLACING CLAIMS IN LOK ADALATS

FOR MOTOR INSURANCE.

 Maximum participation and disposal of large number of claims in lok Adalats

sessions should be in short.
 Companies should placed the claims normally falling within the following
parameters before lok Adalats:

1) Where occurrence of the accidents is within the policy periods.

2) Where estimated liability is not expected to be exceeding rupees 5 lacs per
application for compensation.
3) Where no substantial point of law is involved.
4) Where no defenses are available under section 149 of the MV Act, 1988, such
as driver not holding effective driving license and breach of policy condition
relating to limitation as to use.
5) Where policy record shows that the driver was holding effective driving license.
6) Where despite concerted efforts on the parts of the insurance companies. they
are not in a position to prove conclusively to the satisfaction of the court that
the person drove the vehicle not duly licensed.

33
7) Since there is provision of automatic transfer of insurance in pursuance of
section 157 of MV Act, 1988 the companies cannot take defense of non transfer
of insurance of vehicle on their books.
8) Where more than one vehicle insured with different insurance companies
is involved in an accident resulting in to third parties claims, companies should
agree for settlement of 50-50 basis to apportion the liability between them.
 Companies should not accept conditional settlement such as subject to
verification of certain documents, production of documents etc.
 On having reached the agreement for compromise settlement concerned MACT
issues a Consent Order specifying inter alia the period during which the agreed
amount should be deposited. On receipt of such order, companies must deposit
the amount as agreed to with the MACT within 30 days from the date of award
as per schedule.
 In the event of lok adalat for pending appeals before High Courts is organized,
such claims where quantum of compensation is in dispute may be considered.

34
 Chapter 11

AUTO POLICY IN UNITED STATES

The Personal Auto Policy, Famous In The U.S. Includes Four Main Types Of
Coverage:

 “third party” liability coverage for liability to third parties harmed by

negligence of an insured person;
 “first party” medical payments coverage for the insured, or in states with no-
fault or related laws, personal injury protection coverage for the insured’s
medical expenses and loss of income;
 uninsured and under insured motorists coverage for losses caused to an insured
by drivers without liability insurance and drivers with comparatively low
liability insurance limits; and
 Coverage for physical damage to or theft of insured autos.

The auto liability coverage in the personal auto policy provides broad coverage for
liability for bodily injury and property damage to other parties arising out of the
use of an automobile by an insured person. As is customary with the liability
insurance, the insurer also agrees to defend the insured and bear the defense costs
and is responsible for negotiating and setting the claims.

Personal auto liability coverage may be sold with a “single limit” that specifies the
maximum amount that the insurer will pay for all damages from a single accident.

35
Under the first-party auto medical payments coverage, the auto owner can receive
payment for medical expenses arising out of an accident. Coverage is for the
medical

expenses for the named insured and family members hurt in any auto and other
persons that are hurt while occupying a covered auto. Coverage limits under such
policies are comparatively low.
In U.S.with no-fault or related laws, the personal auto policy includes personal
injury protection coverage for the named insured, family members, and parties hurt
while occupying a covered auto instead of medical payment coverage.

36
 Chapter 12

FACTORS CONSIDERED FOR PREMIUM RATING

Automobile insurance pricing has always been a matter of controversies to the

consumers, service providers and the regulators. Auto claims have increased
significantly in India since last 10 years. Auto insurance rates charged to different
customers reflect differences in the discounted expected costs of providing
coverage. In order to classify different persons into homogenous groups with
respect to expected claim costs, insurers generally use rate classification system
that includes:
driver classes that reflect the characteristics of individual insured, and territorial
rating to reflect expected differences in claim costs for people that live in different
geographical areas (holding individual characteristics constant). Of course,
physical damage rates also depend on the type of vehicle, given evidence that
certain vehicles are more likely to be involved in at-fault accidents. The major
factors considered in establishing driver classes and the use of territorial rating
factors are:

DRIVER CLASSES
The parameters are Age, Gender, and Martial Status, use of automobile, driving
education and driving record. The insureds in younger age group, the males, the
married ones and new and inexperienced drivers have on average high accidental

37
claims. The loading on the premium increases by the numbers and amount of
accident claims.

TERRITORIAL RATING
Large cities have higher average claim costs followed by suburban areas, smaller
cities, and small towns or rural areas. In India, the geographical areas have been
classified into Group A and Group B.

Motor/ Automobile Insurance business in India is governed by the All India Motor
Tariff, which lays down the premium rates, terms and conditions. The main factors
taken into consideration for rating in India are vehicle classifications on several
parameters, the geographical area of operations and experiences.

VEHICLE CLASSIFICATION
Vehicles are generally classified on the basis of its technical specifications, its
value or use.

TECHNICAL SPECIFICATIONS (“The Type”)

The typology of a vehicle is more or less based on its cubic vehicle weight and its
carrying capacity. Heavier vehicles are more exposed to accidents since the
resultant damages they incur are more. Similarly, vehicles with higher carrying

38
capacity expose more passengers to risk. Therefore heavier vehicles attract higher
premium rate. In private cars, taxis and motorcycles, the factor is the cubic
capacity. The more the cubic capacity, the higher the premium rate. Whereas in
goods-carrying commercial vehicles and passenger-carrying commercial vehicles,
the criteria are gross vehicle weight and passenger carrying capacity respectively.

THE VALUE OF THE VEHICLE

The premium rate is applied on the value of the vehicle to arrive at the premium
payable. It is the owner/insured who has to select a correct value of the vehicle and
declare the same for insurance. This value is known as the Insured’s Estimated
Value (IEV) in motor insurance and represents the sum insured.

Normally, this value is arrived at by considering the age of the vehicle and its
present purchase price. A Maruti 800 was purchased in 1998 for Rs. 1, 80,000/-
considering the conventional 10% depreciation each year and the present purchase
price of a similar vehicle at Rs. 2,00,000/- the IEV for year 2000 is Rs. 1,80,000
less 20% of Rs.2,00,000 = Rs. 40,000.00

IEV = Rs. 1, 40,000.00

However, this is not sufficient for deriving the correct IEV of the vehicle in terms
of motor insurance. In motor insurance, the basis for payment of claims in the
market value of the vehicle at the place and time of loss. This market value may be
understood as, the price that the vehicle would fetch in the second-hand market.
For certain vehicle, there is a good demand in the second-hand market. Maruti is
one of them. The 1998 model mentioned above may fetch a price of say, Rs. 1,

39
50,000. In such situation, the correct IEV for the Maruti of 1998 model should be
Rs. 1, 50,000.

Now take the case of a Premier Padmini car of 1998 was say, Rs. 1, 80,000/- the
depreciated value in year 2000 works out to Rs. 1,40,000. But, the second-hand
value would be at most Rs. 30,000, since it has virtually no demand in the market.
In this case, the correct IEV should be Rs. 30,000/- only. It is not worthwhile to
insure your vehicle at a higher value since that will increase the premium payable
but, in case of total loss, only the market value would be payable.

In motor insurance, the IEV is the limit of liability per accident and not for the
entire period of insurance. In cases of partial loss or losses, which may be made
good by repairs, there is no limit to the number of accidents in any period of
insurance. Suppose the Premier Padmini car, as described above, claims for two
accidents in the year 2000, the first for an amount of Rs. 20,000/- and the second
for Rs. 15,000/- under its insurance policy with IEV of Rs. 30,000/- both these
claims can be recovered from the insurance company, since their respective values
are within the limit of IEV, irrespective of the fact
that the insured in this process recovers more amount during the period of
insurance than he was insured for.

However, if the vehicle is totally lost or damaged and cannot be repaired, the
insured would be paid the market value or IEV, whichever is less. It is very
important to select a correct IEV for insurance. There is a tendency of motor

40
vehicle owners to declare a lower value for insurance to reduce the premium
expenditure. Although, insurance companies

check the IEV for its sufficiency before accepting the insurance, this is not a
correct practice as the insured is exposed to a greater loss in case the vehicle is
totally lost or damaged.

THE USE OF THE VEHICLE

Risk exposure varies in relation to the use the vehicle is put to. Private cars are
lesser exposed than taxis, as the latter is used extensively for maximum revenue.
Taxi’s therefore attract a higher premium rate. Similarly, goods carrying vehicles,
which are used as private carriers and transport, only their owners’ goods attract a
lower premium, than those used as public carriers for transporting goods for hire.

THE GEOGRAPHICAL AREA OF OPERATION

The area of operation of a vehicle also has a direct bearing on the premium rate.
This is so because, certain areas of operation are more congested with high
densities of population and road traffic than others and poses higher exposure to
accidents. For this purpose, the tariff differentiates two zones in India, i.e. Zone A
and Zone B, for private cars and taxis. Zone A represents the Kolkata region, Delhi
region and Mumbai city. In zone B, the densities of population and road traffic are
more and hence attract a higher premium rate.
Such differential rating does not apply to commercial vehicles such as trucks and
buses, as these vehicles normally travel throughout India for their operation.

41
However, discounts is allowed on the premium for commercial vehicle used as
contract carriage, school buses, public and private buses for carrying
passengers/workers and operate within a radius of 50 kilometers from the city
limits.

Details of States under Zone A & Zone B

Zone A Zone B
Andhra Pradesh Andaman &Nicobar Mumbai City
Islands
Goa, Daman, Diu Arunachal Pradesh Nagaland
Gujarat Assam Orissa
Karnataka Bihar Punjab
Kerala Delhi Rajasthan
Madhya Pradesh Haryana Sikkim
Maharashtra Himachal Pradesh Tripura
(Excluding Mumbai Lakshadweep Islands Uttar Pradesh
City)
Pondicherry Manipur West Bengal
Tamil Nadu Mizoram

THE CLAIMS EXPERIENCE

42
Unfavorable claims experience is obviously a bad risk. The tariff has adopted a
system called the “No Claim discount”, to give discount of good claims experience
and a loading for bad experience. The claim experience of expiring of expiring
year’s policy is the basis for allowing discount or charging a loading.

Chapter 15

MOTOR INSURANCE – CURRENT AND EMERGING

SCENARIO

43
India is witnessing a boom in car and bike sales and it could not have come at a
better time. The burgeoning middle class and the improvement in roads and
highways have only accentuated the vehicle sales. The spill over effect of this
boom has let the motor insurance portfolio of insurance companies also on the
growth highway

SCENARIO PRE-2001 ERA - DEALER'S AND INSURER'S PERSPECTIVE

In fact, it will be interesting to know what happened prior to 2001 and I would like
to highlight some of the issues prevalent at that time. Let's first look at it from the
dealers' perspective. The concerns were –
 They used to get commission as little as 5% and that too in non-financed cars.
 Only 18% of the car policyholders used to make claims.

 There was no system to chase renewals and the only interaction point with the
insurance company was the development officer.

In short, insurance was a low priority for the dealer as well as the manufacturer.
On the other hand from the insurer's perspective, motor insurance was a loss-
making portfolio and at best a nuisance. There was no real strategy to control
claims and the poor customer interface was accentuated with excessive dependence
on independent surveyors. There was no data capturing or analysis for customer
segmentation.

PARADIGM SHIFT IN 2001

44
The liberalisation in 2001 lead to a paradigm shift and changed the perspective of
how dealers, motor manufacturers viewed motor insurance. We at Bajaj Allianz
adopted a

dealer centric business model, where commission income was increased, and
introduced better customer convenience by enabling policy issuance at dealership
location. As a result, body shop income increased by 100%. We also had strategic
partnership with auto manufacturers like Maruti Udyog Limited and Ford Motors.
We are looking at this portfolio with a strong commitment and our focus would be
on data capturing/ analysis besides our core competence in claims management and
service.

CURRENT SCENARIO

The scenario is much different today and motor insurance gets its due importance.
Motor insurance today constitutes 60% of the portfolio for most of the general
insurance companies in the world. The trend would be the same in India also. In 5
years, the motor insurance is slated to increase from Rs. 8,000 crores to Rs. 20,000
crores. Currently, it is 41 % of the total general insurance business up from 36%
five years back. The current state of motor insurance as prevailing today can at best
be summarised as below -
 Insurance has become the important driver for dealer profitability and customer
satisfaction;

45
 Motor insurance especially private cars, is an area which all insurers want to
develop;
 Continuous increase in cost and charges for labour & parts and higher awards
for third party claims are pushing the claims ratio up.
 The next paradigm shift could happen when de-tariffing happens. The fastest
growing regions are Deihi, Andhra Pradesh, Karnataka, Maharashtra and
Gujarat.

EMERGING SCENARIO - IMPACT OF DE-TARIFFING

It is asked what would be the impact of de-tariffing on the motor insurance
portfolio, for which I have this standard answer - A known devil is better than the
unknown. I would say that the actual impact can only be felt when it actually
happens, as the depth of the water can only be felt when we swim in it.
Nevertheless, some learnings from other countries would help so that we can
prepare for the eventuality. As experienced in other countries, the premium rates
can plummet and sometimes unrealistically. When motor insurance is an additional
and consistent revenue stream for the dealers, one can imagine the impact, which
can be dreadful. So, I feel customer segmentation is the only way to survive in a
price driven market.

Country like Italy, which was de-tariffed in mid-nineties provides some good
learning points. The size of the country would be smaller than any of an average
Indian state; however, the country has been divided into 620 geographic risk zones
for insurance rating purpose and insurance companies use up to 76 variables for
rating. In contrast, India has only 2 zones so far.

46
Further, there are no proper tariffs available.
One thing that is certain among all the uncertainties is that de-tariffing would
change the scenario dramatically and may also impact the biggest profit driver for
the dealer. Some of the changes that I foresee areas below –
 Premium rates could vary significantly based on make, model & geographic
zones.

 Dealers will face increased competition from agents in renewals as

"information" in proposal forms is much better at the agents hand.

 Insurers may be forced to develop non-dealer channels to reduce commission

& average claim size as pressure on margin will increase.

WHAT'S IN IT FOR DEALERS?

A pertinent question in the minds of the dealers would be - "What's in it for us?"
Well, it can be an opportunity or threat as an individual sees it. I would say, it is an
opportunity for both the dealers and the insurers provided you look for strong
partner and long-term partnerships with insurers for mutual benefit, such as –

 Repair instead of replacement - this will be beneficial for dealer & insurer;

 Instead of reducing premium, look at additional insurance product like

depreciation cap/conveyance expenses/extended warranty;

47
 Big dealers have opportunities to set up facilities for repairing all makes and
models.

A hypothetical example of how repair instead of replacement would be beneficial

to the dealer and the insurer can be explained as below –

COST IF DOOR IS REPLACED:

 Part cost Rs. 14,500/- + Labour replacement: Rs. 350/-
 Net profit for repairer: Rs. 2,475/-
 Net liability on insurer: Rs. 14,850/-

COST IF DOOR IS REPAIRED WITH SKIN:

 Cost: Rs. 3,500/- + skin replacement: Rs. 2,100/-
 Net profit for repairer: Rs. 2,625/-
 Net liability on insurer: Rs. 5,600/-

48
 Chapter 16

Case study

Claims settlements

“WHEN YOUR COMMITMENT IS AT STAKE OF YOUR MATTERS”

CLIENT
REWA Tollway Private Limited belongs to the well known IJM Group of
companies. IJM have their Head Office in Malaysia. IJM is engaged in
construction activities in India and are located in Hyderabad.IJM Corporation
Berhad has formed its subsidiary known as REWA Tollway Pvt Ltd. exclusively
for development, construction, strengthening and widening of roads between Rewa
- Jaisingnagar - Shahdol – Amarkantak Road (246 KM) and Satna - Maihar -
Umaria Road (141KM) in Madhya Pradesh. The project period is 18 Months.

INSURANCE
The above two Road projects were covered by BAJAJ ALLIANZ GENERAL
INSURANCE CO. LTD. under two different CAR Policies alongwith ALOP
insurance.

WHAT HAPPENED?

49
In the month of September 2003, Satna in Madhya Pradesh experienced
unprecedented rains. During these unprecedented rains heavy losses were reported
in Satna .This act of god had caused the wide spread flood/inundation at various
places including insured's construction site. The rain carried over the silt and mud,
contaminated the material mainly Granular Sub-base (GSB), Wet Mixed
Macadam (WMM), Dense Bituminuous (DBM) and SDBC laid on road where
work was in progress along with entire stretch. As a result sections of the road
were severely damaged.

ROLE OF BAJAJ ALLIANCE

Immediately on receipt of claim intimation from brokers, a preliminary surveyor
was appointed through our Bhopal Office. Based on the preliminary survey
findings and the estimates, surveyors M/s Cunningham & Lindsey, Bombay were
deputed by our Head Office for final survey on 21/10/2003. In consultation with
the insured at Hyderabad, the final surveyor visited the site from27/10/2003 to
3/11/2003. After the first visit, series of joint meetings were held with the Insured
at Mumbai and Hyderabad. Again one more visit was made to the site by the final
surveyors for detailed inspection, along with the insured's representatives and our
officials. An initial On A/c payment for Rs. 50 lakhs was on 17/2/04to enable the
insured to mobilize resources to restart operations. In the last week of February the
client finalized their estimate of claim and on 10/03/04evaluated the repair works
progress. The actual loss was assessed & arrived at for the two projects and the
claims was assessed and finalized for Rs. 6.4 crores on 10/3/04 itself. On 12/3/04

50
Rs. 3 crores was released based on the verbal agreement arrived on 10/03/04 and
without waiting for the final survey report. The balance amount is being paid in the
following week upon submission of the certified bills and survey reports.
LESSONS LEARNT
Be alive to the clients' aspirations and empathize with them. A disaster has
occurred in an area where the clients on-going project was located. Any delay in
remobilizing resources could have led to penalties being levied on the insured for
delay in project completion arising out of their contractual agreements. Immediate
action on our part has ensured that the project gets completed within the time
frame.

51
 Chapter 17

AN ARTICLE ON MOTOR INSURANCE

WHY CAR INSURANCE IS A MUST
Kairav Shah in Mumbai

May 07, 2007

Insurance, suddenly, has taken centre-stage because of the increasing penchant of

individuals towards all kinds of loans. With the consumer becoming more loan-
friendly, the obvious fallout has been the requirement to stack up on insurance as
well.
However, taking insurance has not been made mandatory by most banks. Of
course, there is an occasional bank that might insist (read request) you to take an
insurance policy, if you are taking a home loan. But legally, they cannot force you
to take one.

52
But the only purchase where it is mandatory to have an insurance is in case of
purchasing automobiles. That is, it is imperative that you have car insurance as
soon as you purchase your car.
In fact, according to the Motor Vehicles Act, 1988, it is mandatory for every owner
of a vehicle plying on public roads to take an insurance policy to cover the amount,
which the owner becomes legally liable to pay as damages to third parties as a
result of accidental death, bodily injury or damage to property. Also, it is necessary
for you to always carry the certificate of insurance in the vehicle as proof.
There are basically two types of motor insurance policies. Type I, which is better
known as Third Party Insurance (Form A), is the one which is compulsory. This
covers the policyholder against damage to a third-party's property or the third
parties themselves.
In simple words, if you were to run into another car and cause damage to that car
and injure the occupant(s) of that car, a third party only policy will pay for the
repair of the other vehicle, and will pay for any medical claims or injuries suffered
by the occupant(s) of the other car and any passengers in your car other than you.
But this policy does not cover the costs of repairing your own vehicle. However,
you could add some riders to this policy that would cover for your legal liability to
pay compensation for:

 Death or bodily injury to a third-party person

 Damage to third-party property

53
Liability is covered for an unlimited amount in respect of death or injury and
damage to third-party property for Rs 7.5 lakhs under commercial vehicle and cars
and Rs 1 lakh for scooters and motor cycles
Moreover, there are additional riders for third-party fire and theft as well. That is,
if your vehicle is stolen or is set on fire, these riders cover them as well.
Type-II policy, better known as the comprehensive car insurance cover (Form B)
covers payout for third-party damages and injuries, will pay out in the event of
your vehicle being stolen or set on fire, and will also pay for any damage to your
own vehicle (regardless of whose fault the accident was).
In addition to the coverage under liability only, this policy covers loss or damage
to the insured vehicle and its accessories due to fire, explosion, self-ignition or
lightning, burglary, riot and strike, malicious act, terrorist act, earthquake, (fire and
shock) damage, flood, typhoon, hurricane, storm, tempest, inundation, cyclone and
hailstorm, transit by road, inland waterway, lift, elevator or air. So, this brings us to
what type of car insurance cover is best for you? As a general rule of thumb, the
following points are worth noting:
If you are young and driving an inexpensive first car then you will probably find
the cost of comprehensive motor insurance very high. For instance, a 20 year-old
buys a second-hand car for Rs 1.5 lakhs. In this case, the cost of a comprehensive
policy would be higher as compared to the cost for a third-party fire and theft
policy.
Of course, if there is an accident and you are at fault and your car is badly
damaged, then it you will have to pay for the repair or replacement of the car. But
if you are young and driving a more expensive car, then it will make sense for you
to have comprehensive insurance.

54
Remember that the no-claim bonus follows the individual and not the vehicle. So
you will be able to garner good discounts on renewal of the policy. The bonus
ranges from 20 per cent to 50 per cent, depending on the number of years for
which no claim has been made. Some important exclusions under this policy
include wear and tear, breakdowns, consequential loss, loss when driving with
invalid driving licence or under the influence of alcohol, use of vehicle otherwise
than in accordance with limitations as to use, etc.
Now, you can do online processing of claims and premium payments. This implies
that life is going to become much easier for the end user.
The writer is head of financial planning at Sykes & Ray Equities.

Powered by

Chapter 18

BAJAJ ALLIANZ'S MOTOR INSURANCE

55
Bajaj Allianz is a joint venture between Allianz AG one of the world's largest
insurance companies, and Bajaj Auto, one of the biggest 2 and 3 wheeler
manufacturers in the world. Bajaj Allianz is into both life insurance and general
insurance.
Allianz Group is one of the world's leading insurers and financial services
providers. Founded in 1890 in Berlin, Allianz is now present in over 70 countries
with almost 174,000 employees. Bajaj group is the largest manufacturer of two-
wheelers and three-wheelers in India and one of the largest in the world.
Today, Bajaj Allianz is one of India's leading and fastest growing insurance
companies. Currently, it has presence in more than 550 locations with over 60,000
Insurance Consultants.

MOTOR VEHICLE INSURANCE

Technology has made our daily life simpler in various ways.Motor vehicle is an
invention which has made daily commuting easy. It is convenient and fast and
saves our time. Though it is easy to own vehicle it is expensive maintaining a
motor vehicle especially in case of damage caused to your vehicle due to some
unavoidable circumstances or accidents. Bajaj Allianz's Motor Vehicle policy
helps you in maintaining your vehicle in such situations.

UNIQUE FEATURE
 For claim free experience, discount available on subsequent renewal.
 Discount available if voluntary excess opted for
 Discount available for membership with approved automobile association
 Discount available for installing approved anti-theft device
 Depreciation, for the parts needing replacement in the accident is defined

56
ADVANTAGES
 Standardized labour costs
 Highest standards of service
 Hassle-free inspection procedures

BENEFITS
 Cashless settlement of repair claims at preferred garages.
 Immediate receipt of policies
 Speedy claim settlement
 Highest standard of services at the preferred garages
 Hassle-free documentation and inspection procedures
 Quick settlement of major losses such as theft/total loss

A NEW ERA IN MOTOR INSURANCE OF BAJAJ ALLIANZ

More and more motor insurance customers understand that favorable premiums are
not enough. Bajaj Allianz offers the most comprehensive benefits system and the
most valuable services in the market.

Customers holding more than one policy with Bajaj Allianz are entitled to a free
credit card
Bajaj Allianz is now offering a set of new benefits to both its existing and potential
motor insurance customers. Hungary's market-leading insurance company has a 50
percent share of motor third party liability policies, according to the most recent
half-year figures.

Bajaj Allianz offers eight new different partner benefits, plus premium discounts
connected to the method and frequency of payment. Loyalty and other benefits
make the new services even more attractive to every customer. Through the
benefits, it is possible to get a premium discount of up to 33 percent.

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EASY ACCESS
The company's national network makes personal contact easy through more than
100 company-owned service units and over 900 contracted body repair shops. The
company's call center and Internet customer care facility offer a wide range of
services: giving information, concluding transactions, starting claims settlement or
registering data changes.

Since Bajaj Allianz introduced its new premium system on October 30, most
telephone calls and clicks have been about premium calculations for third party
insurance. Within the first three days, 130,000 customers received their individual
quotes.

HELP AND CREDIT CARDS

Customers have also been informed about the company's brand new services:
policy holders are entitled to free assistance, a right that is not restricted to
accidents. If the policy holder's vehicle breaks down, the call center will also take
his call and send assistance.

It is also a significant novelty that customers holding more than one policy are
entitled to a free credit card with the Allianz Foreign Trade Bank MKB – without a
separate credit rating. The deal includes a special insurance for the goods
purchased with the card. Additionally, there is a discount of three to eight percent
off the liability insurance premium.

ACTIVE CLAIMS SETTLEMENT

Active claims settlement is probably Bajaj Allianz most significant product
development. While even these days several market players only compete by
offering "service-free" premiums, it is perhaps the most important factor in the
change of eras that Bajaj Allianz does not abandon its customers and provides
extras much beyond the obligatory.

The improvement benefits not only the car owner who is highly dependent on his

58
car: 70 percent of vehicle owners use their cars on a daily basis, as a survey
conducted by Bajaj Allianz this year shows. Furthermore, according to the same
survey, on average two more people depend on the same car.

In the case of an accident caused by somebody else, every Bajaj Allianz customer
holding both third-party and fully-comprehensive insurance with Allianz Hungária
can file the accident claim directly with Bajaj Allianz.This means it's not necessary
to approach the insurance company of the other party to get his car repaired.
Furthermore, his damage-free status remains unchanged.

EUROPEAN MOBILITY PROGRAM

Active claims settlement is an integral element of the European mobility program,
which Bajaj Allianz introduced in May 2004 to enhance the service quality in the
Bajaj motor insurance market. Significant discounts introduced at that time are
now coupled with additional discounts in third party insurance and active claims
settlement.

This might give a real boost to the Bajaj vehicle insurance market and could
support the Bajaj convergence with Europe.

59
 CONCLUSION

India is witnessing a boom in car and bike sales and it could not have come
at a better time. The burgeoning middle class and the improvement in roads and
highways have only accentuated the vehicle sales. The spill over effect of this
boom has let the motor insurance portfolio of insurance companies also on the
growth highway.

Today’s consumer has became more conscious about his health and wealth
also they are becoming more demanding due to awareness of insurance therefore,
Motor insurance companies are facing challenges of Best service level at the
lowest price. This creates competitions between insurance companies. However,
Insurance Companies are trying to overcome the challenges by providing 24/7
assistance to customers for all product queries and claims information.

As compared to Insurance abroad, motor insurance companies in India still

have a long way to go. Since, India is booming in car and bike sales and even with
the awareness of motor insurance in people motor insurance company is going to
have a better time in future.

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 RESEARCH DESIGN

DATA COLLECTION

3.1 PRIMARY DATA COLLECTION :-

In this chapter the focus will now shift to the choices of researchers for
collecting primary data. The researcher will opt for either quantitative research
methods or qualitative research methods or a combination of the two. For all
practical purposes, usually not much about a marketing problem is known to the
researcher, so they will start with the survey method of data collection.

This chapter will involve discussions on sampling as the basis of survey,

questionnaire and interview methods of data collection.

SURVEYS:-

One of the most preferred methods for collecting primary data is the
survey method. The biggest advantage of the survey method is that at a time a lot
of information (or data) about a single respondent can be obtained. And secondly
the versatility of this method enables the researcher to mould the survey method to

61
the research objectives, in any setting - be it the bubbling youngsters, growing
teenagers, mobile youth or aging executives.

Usually, surveys are designed so as to collect variety of information on

various diverse topics and subjects. We will focus our attention on three popular
method of conducting research.

A. Personal interviews.
B. Telephone interviews

A. PERSONAL INTERVIEWS:

Generally personal interviews are classified based on the respondents to

be conducted and the means of contacting them.

During the personal interview session, the interviewer and interviewee

simultaneously interact and influence each other. The interview environment is
selected based on the type of data, which is being sought.

i. Face to face or Door to door interview:

This has traditionally been considered as the best survey method. This is
because of the various advantages involved in a face to face interaction between
the interviewer and respondent enabling:-
 Immediate response or feedback from the respondent.

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 Facilitates clarifying doubts or facts.
 Allows display of product concepts and other stimuli for evaluation.
 Permits modification of questionnaire techniques depending upon the
requirement.
 Conducive, familiar and comfortable environment for the interviewee
making the interaction more easy and appropriate.

TELEPHONE INTERVIEW:

A large class of consumer behavior problem can be attempted to be solved by

adopting the telephone interview method of collecting information . This is also
being accepted as a popular as a popular method especially with the cost and non-
response problem of personal interview becoming more acute .

The telephone interviewing process though quite similar to personal interview

involves certain steps in the form of :

a. Selecting of study participants telephone numbers.

b. Making the telephone call.
c. Introduce and gain rapport with the target study participants.
d. Work out and clarify the convenient time of the respondent for interview .
e. Schedule a call report .

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SECONDARY DATA COLLECTION

Secondary Method :

Secondary data means data that are already available i.e. they refer to the
data which have already been collected and analyzed by someone else. Published
secondary data was used to get an overall idea about the growth of service
marketing in banking sector after globalization with the help of source like:

 Books
 News papers
 Reports prepared by research scholars
 Websites

Secondary research or desk research is so called because it is usually

concerned with the use of secondary data or information that is already available.
This means such data have already been collected and analyzed by someone else.
Such information has not been gathered afresh specifically for any research

64
project. This information is inclusive of a wide range of material – Books,
Magazines, and Websites, Company reports, Newspapers.

MOTOR INSURANCE

Bachelor of Commerce
Banking & Insurance
Semester VI

(2009-2010)

Submitted by:
GOWDA SOWMYA SHIVRAJ
Roll No: 22

Shri Rajasthani Seva Sangh College of Arts and Commerce,

J.B.Nagar Andheri (East), Mumbai – 400059.

65
 MOTOR INSURANCE

Bachelor of Commerce
Banking & Insurance
Semester VI

In Partial Fulfillment of the requirements for the Award of Degree of

Bachelor of Commerce - Banking & Insurance.
By
GOWDA SOWMYA SHIVRAJ
Roll No: 22

66
 Shri Rajasthani Seva Sangh College of Arts and Commerce,
J.B.Nagar Andheri (East), Mumbai – 400059.

Shri Rajasthani Seva Sangh College of Arts and Commerce,

J.B.Nagar Andheri (East), Mumbai – 400059.

CERTIFICATE

This is to certify that Ms. GOWDA SOWMYA SHIVRAJ of B.Com.

Banking & Insurance Semester VI (2009-10) has successfully completed
the project on MOTOR INSURANCE under the Guidance of Prof. Ms.
NANDA INDULKAR.

67
Course Co-ordinator Principal

Project Guide / Internal Examiner External Examiner

DECLARATION

I Ms. GOWDA SOWMYA SHIVRAJ student of B.Com Banking &

Insurance Semester VI (2009-10) hereby declare that I have completed
the Project on “MOTOR INSURANCE”.

The information submitted is true and original to the best of my

knowledge.

68
 Signature of Student

SOWMYA S. GOWDA
Roll No: T.B-22

ACKNOWLEDGEMENT

I would like to thank the teaching faculty of “SHRI RAJASTHANI SEVA

SANGH COLLEGE OF ARTS AND COMMERCE” Affiliated to the
University of Mumbai for their excellent suggestion.

A special thank to Miss. Nanda Indulkar, Coordinator for her constant

encouragement and guideline from the beginning to the end with never ending

69
patience. Her constant support and efforts helped me to complete my project on
time.

I would also like to take an opportunity to thank all friends for co-operating
with me and to all the people who are directly or indirectly connected to the
project. Above
all thanks to our Principal Mrs. Trishala Mehta and Vice Principal Mr. Vinod
Tibrewala for her/his co-operation during the time of completion of the project.

I would also like to thank our respected Professors like Miss. Nanda
Indulkar, Ms. Bhavana Naik, Mr. Mahendra Mishra, and our Librarian Kawade
Subhash, without whom the project would have not come to an end.

SOWMYA S. GOWDA
Roll No: T.B-22
Place:
Date:

70