Motor Insurance

MOTOR INSURANCE
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COURSE OBJECTIVES
The course aims to enable participants acquire knowledge
and skill on:

Brief history & development of motor insurance

Legal considerations;

Types of Motor Insurance

Scope of cover,exclusions,conditions,extensions &additional
benefits

Underwriting and rating factors of motor insurance

Claims processes of Motor Insurance.
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CONTENT
BRIEF HISTORY & DEVELOPMENT OF MOTOR
INSURANCE
 Development of Motor Vehicles
 Beginnings of Motor Insurance
LEGAL CONSIDERATIONS
 Third Party Obligatory motor Insurance Proc. No.
 Insurance Fund Administration Agency(IFAA)
 Use of Vehicles Outside Ethiopia
 Yellow Card System(scheme)
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Content Cont…
TYPES AND SCOPE OF COVER OF MOTOR
INSURANCE, EXCLUSIONS,CONDITIONS
etc. UNDER
 Compulsory(Obligatory)Third Party Motor
Insurance
 Third Party only Motor Insurance
 Third Party, Fire & Theft Motor Insurance
 Comprehensive Motor Insurance
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Content Cont…
PRINCIPLES OF RATING & UNDERWRITING

 General Principles of Rating & Underwriting
 Rating and Underwriting Considerations
Specific to Private Motor Insurance
 Rating & Underwriting Considerations for
Commercial Motor Insurance
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Content Cont…
RENEWAL of COVER
 Private
 Commercial
CLAIMS MANAGEMENT
 General features of insurance claims procedures and
overview of claims
terminology, processes and concepts
 Key issues relating to claims arising under motor insurance.
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Content Cont…
Approaches to complaint handling and
dispute resolution
- Alternative Dispute Resolution(ADR)
- Arbitration
- Complaints Procedures
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BRIEF HISTORY & DEVELOPMENT OF
MOTOR INSURANCE
Development of Motor Vehicles
• The development of the motor car began in 1879 when
George Seldon applied for a patent for a road locomotive.
• Six years later (1885) Daimler & Maybach created the first
motor car.
• Not until 1896 that the presence of a man marching in front
of a vehicle was deemed unnecessary. The safety measure
had become impractical because the speed limit was raised to
twelve miles per hour at that time.
• The first recognizably modern car took to the road in 1901 .
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Brief history cont…
• It was designed by Wilhelm Maybach & Paul

Daimler for the financier Emilee Jellimek and it
was named after Jellimek’s daughter, Mercedes.
• At that time, development of motorcycles in the UK
and the USA was taking place, and production
began in 1903.A world motor car boom in 1905 and
in 1906 precipitated development of the first mass
produced car.
• Henry Ford’s Model ‘T’. Fifteen million were made,
the last one rolling of the line in 1927.
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• The symbol of modern road transport, the

motor car, is said to have been introduced to
Ethiopia when the first four-wheeled
automobile Registration no. D3130 was
brought into the country around 1907, during
the reign of Emperor Menelik.
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BEGINNINGS OF MOTOR INSURANCE

• The First World War gave a boost to auto technology.
• Motor vehicles were required in huge numbers to
transport people, supplies and other necessary
materials from place to place.
• After the end of the war, the auto industry, which as
a result of sheer necessity developed quite
considerably during the war, was forced to find a
new market to sell its output.
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• Mass production of the auto industry and the

development of the hire-purchase system resulted in an
enormous growth of motor vehicles and motor cycles
on the road, with a corresponding increase in demand
for insurance.
• Immediately after the 2nd World War owning a car was still a
luxury, and mechanically propelled vehicles were not in any
significant number before the beginning of the twentieth
century. Later on, improved standard of living allowed
individual persons to own a car.
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• In addition to the private individuals,

commercial motoring and road transport
companies increased to considerable number.
These facts on the other hand brought about
a significant development in motor insurance
in the world.
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• Safety features were increasingly seen to be of

significance and integral to a vehicles production.
• Seat belts, first installed by Volvo in 1963,became
standard in American cars during the 1960. They
became compulsory in both Europe & USA by the 1980s.
• As far as the Ethiopian experience is concerned, records

witnessed that South British Insurance Company was the
first to issue Motor insurance policy in 1950.
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LEGAL CONSIDERATIONS
This part of the presentation is concerned with

the background to legislation, regulation and
institutions affecting motor insurance.
Compulsory Third Party Motor Insurance
Proclamation No.799/ 2013
• This proclamation may be cited as the
“Vehicle Insurance Against Third Party Risks
Proclamation No.799/2013(Art.1)
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Compulsory Third Party Cont…
• The law first proclaimed in 2008 under

Proclamation No.559/2008 and repealed in
2013 by Proc.N0.799/2013
• The experience gained during its application

since 2008indicated that there was a need to
alter the legal framework of obligatory
insurance, so as to strengthen the legitimate
rights of the victims of traffic accidents.
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• Compulsory third party motor insurance is

one of the effects of legislative developments.
Almost all countries have introduced and
Ethiopia declared the compulsory third party
motor insurance since 2008.
• Similar statutory requirement was first
introduced in Denmark in 1918 followed by
Norway in 1927.
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• In the UK Road Traffic Act in 1930(RTA)

which imposed a statutory obligation on all
motor vehicle owners in that country to
insure or provide security against their legal
liability for death or bodily injury caused to
third parties.
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COMPULSORY MOTOR T.P.L. INSURANCE IN THE WORLD
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ENFORCEABILITY OF T.P.L. LAW IN RESPECT OF BODILY INJURIES
AND MATERIAL DAMAGES
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• The rational behind the statutory

requirement/proclamation:
- loss of lives, bodily injuries and damage to

properties caused by vehicle accidents are creating
social problems
- it is necessary to establish a system for facilitating
the provision of emergency medical treatments to
victims of vehicle accidents, and to require owners of
vehicles to have TP insurance coverage against TP
risks.
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• Under Proclamation No.799/2013 no person

in Ethiopia shall drive or cause or permit any
other person to drive a vehicle on a road
unless he has a valid vehicle insurance
coverage against third party risks in relation
to such vehicle. It is therefore a compulsory
or obligatory motor vehicle insurance
coverage. It is a greater opportunity for the
insurance companies in Ethiopia as well.
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Types of Motor Insurance
 Compulsory(Obligatory)Third Party Motor

Insurance
 Third Party only Motor Insurance
 Third Party, Fire & Theft Motor Insurance
 Comprehensive Motor Insurance
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Compulsory(Obligatory)Third Party Motor Insurance
• This is the minimum cover provided by motor

insurers which is sufficient to comply with
the minimum insurance requirements of
Ethiopia (i.e. Proclamation no. 799/2013 ).
• Cover will apply to incidents which occur on

a road as defined in the Proclamation.
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Compulsory(Obligatory) cont…
Article 2 (9) of the Proclamation defines "road” as

follows:
“Road” means any highway, urban or
rural street, parking or terminal, bridge
or any other passage used by a vehicle
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Basic compulsory policy provides the following cover:

• Bodily Injury:
Compensation for death up to Birr 40,000 per person with
minimum Birr 5,000
Compensation for disability up to Birr 40,000 per person Birr

5,000
Medical Expense up to Birr 40,000.00 which will be deducted

from disability/death compensation
– Emergency Medical Treatment up to Birr 2,000 per person
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• Property damage:
 Compensation for third party property damage up
to birr 100,000 per event for both private and
commercial motor vehicles
• Legal costs incurred in defending an action

for damages
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There are certain Exclusions:

 Death or bodily injury arising out of and in the
course of employment by the insured.
 Death or bodily injury to immediate families of the
owner/driver
 Loss of or damage to the:
• insured vehicle
• goods being carried
• goods in the user's custody or control
• any contractual liability.

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• Most of the policy exclusions and conditions not

operational, but insurers have subrogation right
against policyholder/driver.
• This cover is usually provided where it is discovered
that the policyholder has a poor accident or
conviction record.
• What will happen if insurers are not willing to
provide the compulsory third party motor policy to a
specific driver/owner?
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Third Party Only (TPO) Cover
 This cover will extend the third party liability cover to

any situation involving a motor vehicle with in the
territorial limit.
• Under TPO policies, off the road cover is also

provided.
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(TPO) Cover cont…
• TPO cover on private policies has a well known

extension which enable the policyholder to drive
a vehicle not belonging to them and be covered
for third party risks. This is commonly known
as the 'driving other cars' extension.
• The extension applies when the insured vehicle

is disabled and not road worthy.
• The wording is as follows:
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(TPO) Cover cont…
• The wording is as follows:

“The policyholder may also drive a motor
car or motorcycle, not belonging to him
and not hired to him under a hire purchase
agreement”.
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Third Party Fire and Theft Cover
• This policy extends a third party cover to incorporate

elements of cover that relate to the policyholder's own
vehicle
• Such a policy will provide indemnity for loss of or

damage to the insured's vehicle and (accessories and
spare parts) caused by fire or theft or attempted theft.
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Third Party Fire and Theft cont…
• Nowadays, most private car policies will provide

fire and theft cover in relation to accessories and
spare parts irrespective of whether they are fitted to
the vehicle, but these must normally be located with
the policyholder's private garage, if not attached.
• Under the motor cycle policy, theft of such

accessories or spare parts will not be covered unless
the vehicle is stolen at the same time.
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• Accessories and spare parts are specifically for

your car and no other car which are in or on your
car or in your private garage at the time of the loss
or damage.
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• Theft:
 Theft according to the Law must include the
intention of permanently depriving, but theft within
the context of motor insurance policies is generally
given a wider interpretation.
 For the purposes of indemnity under the theft
section of a policy, cover is given in respect of loss
or damage caused by unauthorized use of the
vehicle (e.g. Joy riding)
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• Fire:
External fire and fire resulted from wear and
tear, mechanical or electrical failures or
breakdown will be covered under this section.
Proximate cause of fire damage is excluded
Resultant effects of internal fire is covered
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Comprehensive Motor Insurance
• It is a comprehensive policy which provides the

greatest extent of cover.
• The term comprehensive can be a little misleading in

that such a policy does not provide blanket cover, no
matter what the nature, extent and cause of the loss.
• The intention is to provide cover for accidental

damage to the insured vehicle and to indemnify the
insured against third party liabilities.
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Comprehensive Motor Cont…
• What is covered under Comprehensive

Motor Policy:
 accidental collision or overturning or collision or
over turning consequent upon mechanical
breakdown or wear and tear.
 by fire, external explosion, self ignition, lightning
 theft or attempted theft
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• by malicious act
• whilst in transit (including the process of loading and

unloading incidental to such transit) by road, rail,
inland waterway, lift or elevator.
• Impact damage caused by falling objects
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Settlement Options
• The Insurer will either:

Repair the damage or
Replace what is lost or is damaged beyond economic repair
or
Pay in cash for the amount of loss or damage.

• Only the insurer has the right to choose which of the above
three options to restore the policyholder to the same financial
position
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• The maximum the insurer will pay is the

market value of your vehicle at the time of
the loss or damage or the Sum Insured,
whichever is the lesser.
• Market value is the amount that it would cost

to replace a vehicle with one of similar make,
model, condition and mileage.
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• Repair cost must be less than or equal to the

Sum Insured or the estimated Market value
whichever is the lesser Less the estimated
Salvage Value.
• Repair Cost <= SI/MV – estimated Salvage

Value
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• An insurer will often pay the pre accident

value for total losses and will sometimes pay
cash in lieu of repair.
• The cash payment option is not particularly

popular with insurers, especially if there is
mechanical damage: there is a fear that the
policyholder will retain the money, and not
arrange for the vehicle to be repaired.
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What is not Insured

• Any excess amounts stated in the schedule – Excess
can be:
 Standard excess
 Young and inexperienced driver excess
 Voluntary excess
• Loss of use
• Depreciation, wear and tear, mechanical or
electrical, electronic or computer failures or
breakdown.
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• Damage to tyres from braking or by road puncture, cuts or
bursts
• Any reduction in the market value of your vehicle following any

repair whether or not as a result of any claim under the policy.
• Loss of or damage to telephone or communication equipment of

any kind unless extended
• Loss or damage as a result of deliberate act by the insured

person.
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Notes on the Loss or Damage
• Accessories are those items which are

necessary to the functioning of the vehicle
and /or would be sold with the vehicle itself.
• Examples:
 Radio cassette player
 Floor mats.
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• Excess :
is the first part of a claim amount which should be
borne by the insured.
The terms of an excess clause give the insurer relief

from liability to pay a specified first part of an
amount otherwise payable under a policy.
An excess amount must be practical and beneficial to

both insurer and insured.
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• The purposes of the excess are as follows:
 To make the insured his own insurer for the specified

amount of the excess thus perhaps encourages greater
care or prudence on his part.
 To relieve the insurer from the necessity to deal with the
smaller losses, many of which will not even be notified to
the insurer with resultant reduction in administration
costs
 An important use of an excess is to counter un-satisfactory
underwriting features.
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Notes on the Loss or Damage …
 Types of Excess
• Excess varies as follows (Two Categories):

 Compulsory Excess - is an excess amount which is
imposed by insurers. A compulsory excess generally, may
not be deleted because it affects the rating. These are:
• standard excess
• young and inexperienced driver excess
• fire and theft excess
• breakage of glass excess
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• Voluntary Excess - is an excess which is

voluntarily accepted by the insured over and
above the compulsory excess to obtain
discount in premium.
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 Young and Inexperienced Driver's Excess:

• The typical policy wording is as follows:
If your car or any of its accessories or spare parts are

lost or damaged whilst the car is being driven by or in
charge of a person who is young(below 21 year) or
inexperienced (the driving license is provisional or
below one year from first issue), you will be responsible
for the first part of the claims cost as shown in the
schedule. This is in addition to any other excess
amounts.
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• Where, at the time of the accident or loss, the

vehicle was parked and unattended, it may be
difficult to determine who was in charge for the
purposes of determining the level of excess.
• A pragmatic approach is required and perhaps
a few guidelines may be followed:
 If the policy is on an owner only driving basis, it
would be assumed that the policyholder was in
charge.
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 The last person to drive the car would normally be

assumed to be in charge, especially if the person
was also going to be the next driver.
 Where a named or authorized driver has previously

used the vehicle, but returned the vehicle keys to
the policyholder, then it should be accepted that the
policyholder was in charge.
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Other Sections of a Comprehensive Policy
• Towing Expense:
 Where the insured vehicle is disabled by the loss or

damage covered under the policy, the insurer will
also pay the reasonable cost of protection and
towing expense up to 20% of the repair cost.
 Discuss the territorial extension to Sudan in this
connection
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Other Sections…
• Unobtainable Parts Clause:

 If any damaged accessory or part of the insured
vehicle is obsolete or can not be obtained, the insurer
will pay the value of the accessory or part at the time of
the loss not exceeding the manufacturer's or dealers
last quoted list price for the accessory or part plus a
reasonable cost of fitting such accessory or part.
 What will be the consequence if the vehicle is drivable?

Eg. Bumper, door
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• Radio or Audio Equipment:
 Generally private car policies will provide cover for

loss or damage for radio or audio equipment up to
a defined financial level
 Most insurers now only cover such equipment
provided that they are given prior notice that such
cover is required and they include the cover by
endorsement.
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• Breakage of Glass:
 Insurers have devised different methods to
deal with such claims.
 Some insurers now incorporate a limit under this

section where by the policyholder can either claim
for windscreen and window damage up to a certain
financial ceiling without affecting their no claim
discount or claim under the accidental damage
section of their policy and thus have their NCD
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• A typical policy wording for such section is as
follows:
 We will pay the cost of replacement of glass in
windscreen and windows and the cost of repairing
resultant scratching of the body work.
 An excess amount of XXXX only will apply to this
section.
 Any NCD will not be affected.
 If the glass is repaired, then the excess will be
waived.
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• New Car Benefit:
This particular section, as can be seen, grants

increased and enhanced policy benefits, and the
wording can vary from insurer to insurer.
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• A typical wording is:
 If within one year from the date of first registration

as new in your name, your car is stolen and not
recovered or is damaged and the cost involved in
the repair will exceed 60% of the manufacturer’s
list price at the time of loss or damage, the
company will replace your car with a new car of
the same make & model providing that a
replacement car is available.
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• The replacement of your car can only take
place with your consent and that of any other
known interested parties.
• The finance company must be prepared to

transfer any outstanding balance to the new
vehicle without any additional financial
responsibility on the part of the insurer.
• The car being replaced will become the
property of the company.
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• If a replacement car of the same make and
model is not available, the company will pay
the market value of your car at the time of
loss or damage.
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• With the above example, the obligation is to provide
an exact replacement but if one is not available, then
the obligation reverts to market value.
• Market value may be somewhat lower than the
replacement price
• Where, settlement is based upon a replacement value,
insurers will be most reluctant to consider settlement
on a cash basis as it could be believed that the
policyholder would wish to make a profit from such a
settlement.
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• Personal Effects and Clothing:
 The term personal effects, clothing or rugs could
accommodate every item within or on the vehicle
which is not an accessory.
• A typical wording is:
 We will pay up to the limit specified in the schedule
for personal effects, clothing or rugs in or on your
car if they are lost or damaged.
 The limit applies to each and every occasion when
loss or damage occurs.
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 If you do not own the property lost or damaged,
you may instruct us to pay the compensation
payable under this section to the owner.
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Other Sections of a Comprehensive Policy …
• What is not insured under this section?

 Loss of or damage to:
• money, stamps, tickets, documents or securities
• goods or samples carried in connection with
any trade or business
• Wear, tear or depreciation
• Theft of any property carried in an open or
convertible car unless in a locked boot or locked
glove compartment.
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Personal Accident Insurance:
• This section provides modest personal

accident benefits.
• What is insured under this extension?
• The following is a typical specimen policy
wording:
 Accidental injury to you or your wife or husband if
you and/or your Wife or husband suffer accidental
bodily injury within the territorial limit, you will
qualify for personal accident benefit.
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Personal accident…
• To qualify for the benefit, the injury must

have been suffered:
 in direct connection with your car or
 while traveling in or getting into or out of any
other car.
 Provided always such injury is the sole cause of
death, loss of eye(s) or limb(s).
 The benefit will be paid direct to the injured person
or to his legal personal representatives.
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• The cover provided under this section is a

benefit, not an indemnity.
• This is important in two ways:

 There can be no contribution from any other
policy or compensation payment
 There is no subrogation right of recovery.
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• What is not insured under the specimen policy

wording?
The benefit will not be payable if the bodily injury
is the result of suicide or an attempted suicide.
The benefit will not be payable if the injured
person has reached the age of 65 years.
If you and/or your wife or husband holds any
other motor insurance policy with us, then the
benefit will be paid under one policy only.
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• What is not insured…?

 Death, loss of eye(s) or limb(s) arising more than
six months after the event leading directly to the
condition.
 The benefit will not be payable if the injured

person was at the time the injury occurred driving
a vehicle and was under the influence of drink or
drugs and/or had a concentration of alcohol in his
body greater than the limits prescribed in the Road
Traffic Acts.
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Medical Expense
• The following is a typical policy wording for such a

clause:
 If you, your driver or any non third party occupants are
injured in an accident involving your car, we will pay
you the medical expenses incurred for each injured
person up to the amount specified in the schedule
 The Maximum limit of the benefit is invariably low.
.
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Commercial Policy – Loss and Damage
• Commercial vehicle policies generally

include the clauses and conditions listed in
the own damage section of a private car
policy with the following differences:
 Damage or loss of spare parts is covered whilst
they are attached to the insured vehicle. That
means, commercial vehicle policy will not extend
such cover whilst the spare parts /accessories are
left in the private garage.
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Commercial policy…
 The personal effects clause may be featured in

some of the vehicles such as small van commercial
policies, but will not be included in the goods
carrying type policies.
 The young and inexperience driver excesses will

often be higher under commercial vehicle policies.
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Commercial Policy…
Trailers - cover may be arranged on a

specified or unspecified basis:
 Specified Trailer basis - this requires the
policyholder to identify each trailer to be insured
and insurers state the details of the specified trailer
in the policy schedule.
 Cover here will be provided when specified trailer
is detached or attached.
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Commercial Policy…
Unspecified Trailer policy - this requires the

policyholder to identify the vehicles which will be used
to tow the trailers.
 Here, the towing units will only be stated in the
policy schedule and each unit will generate an
additional premium.
 As a consequence, cover operates only when a
trailer is being towed by a specified towing vehicle.
Separate fire & Theft cover may be required when
the vehicle is detached from the towing vehicle.
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Motor Trade Insurance – Loss and damage
• Motor trade insurances policies can be:
 Road risks Insurance policy

 internal or premises risks insurance policy
 Or comprehensive road and garage risks
insurance policy

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Motor Trade…
• Road Risks Policies:

 This policy operates in respect of the various
vehicles that pass into policyholder's possession,
normally for selling or repairing purposes.
 Such policies will normally indemnify against
accident, loss or damage to any vehicle which is the
property of the insured or is in their custody or
control.
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Motor Trade…
 The accident, loss or damage must occur whilst the

vehicle is on a road or is temporarily garaged
during the course of a journey elsewhere than in or
on any premises owned by or in the occupation of
the insured.
 Indemnity is granted in respect of any vehicle
which is the property of the insured or is in their
custody or control.
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Motor Trade…
 Cover can be provided on:

 Trade Plate Number basis:
• Any motor vehicle the property of the insured or
in his custody or control carrying in the
specified plate number as specified by law
 Named Driver Basis:
• Any motor vehicle the property of the insured or
in his custody or control being driven by (name)
or in his charge for the purpose of being driven
by him.
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Motor Trade…
• Internal Risks Policies:

 Such policies provide indemnity to motor traders
for losses and liabilities that arise from accidents at
the motor trader's premises.
 Cover can be Third Party only or Third party and
Damage cover.
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Motor Trade…
• Third party only cover- provides indemnity in

respect of:
 Liability for accidental death or bodily injury to
any person other than a person who at the time of
sustaining such injury is engaged in the service of
the insured.
 Liability for accidental damage (other than by fire
and/or explosion) to property other than property
belonging to or held in trust by or in the custody or
control of the insured.
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Motor Trade…
 Accidental damage (other than by fire and/or

explosion) to any motor vehicles held in trust by or
in the custody or control of the insured other than
a motor vehicle belonging to the insured or a
member of the insured's family or any employee of
the insured.
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Motor trade…
• Third Party and Damage Cover:

– In addition to the above, it covers loss or damage to
the insured's own vehicles normally subject to an
excess in respect of each and every accident.

• Both policies will exclude loss, damage or
liability resulting from fire, explosion, theft
or weather condition.
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Motor Trade…
• Combined Road and Garage Policies:

 This policy tends to be more than just a
combination of the road risks and internal risks
policies
 It provides cover for loss or damage to property:
• belonging to the insured
• in the insured's custody or control for which the
insured may be responsible

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Motor trade…
This policy provides cover in respect of theft of vehicles

from the insured's own premises excluding theft or
dishonesty by:
employees
Partners directors
Vehicles in the insured's custody or control are covered
whilst they are:
on the road
garaged away from their own normal business
premise
• garaged in the insured own normal business
premises.
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Private motor Policy – Liability Section
• What is insured:
• Cover provided for you:
• This policy Covers you for all sums you
become legally liable to pay for:
 Death or injury to any person
 Damage to any other person's property
 The same cover will apply if you are driving any
other car which the schedule permits you to drive.
12/18/2020 88
Private motor Policy – Liability Section cont…
• Cover Provided for Other People:

• At your request, we will provide to the
following people the same insurance cover we
gave you.
 any one you allow to drive your car provided he
has valid license
 any one you allow to use your car
 any person traveling in or getting into or out of
your car
12/18/2020 89
 Your employee for any car covered by this policy used

by you or him with your permission and provided such
use is other wise permitted by this policy. (This covers
an employer's vicarious liability.)
12/18/2020 90
• What is not insured in this section?:

 Loss of or damage to the insured car
 Any liability when your car is driven by anyone
who has never held a license to drive it or who is
disqualified from holding or obtaining such a
license.
who fails to comply with any of the terms,
exceptions, conditions and endorsements of this
policy which apply to him
12/18/2020 91
Private Motor Policy – Liability…

entitled to such cover under any other policy
 Liability for death of or injury to any person
arising out of and in the course of his employment
by any person insured under this policy.
 Liability for loss of or damage to property
belonging to or in the custody or control of any
person insured and who is driving under this part
of the policy.
12/18/2020 92
Commercial Policy – Liability Section
• The Main provisions of the commercial vehicle

liability section follow those in private car policy.
• However, there are some areas where the
difference is fundamental.
• Here, we shall concentrate only on such
differences and in the absence of any comment to
the contrary, the commercial vehicle policy
wording will follow that of the private car policy.
12/18/2020 93
Commercial Vehicle – Liability…
• Trailers:
 Generally it has now become standard practice for
insurers to include in the good carrying vehicle
policy third party cover for trailers whilst attached
to the insured vehicle.
 The policy wording in this market excludes liability
whilst the insured vehicle tows a trailer which is
not insured and stated under the schedule of this
policy.
12/18/2020 94
• Loading /Unloading:
 The company shall not be liable for damage, death
or injury caused by or arising beyond the limits of
any carriage way or thoroughfare, in connection
with:
• the bringing of a load to the insured vehicle for
loading thereon or the taking away of the load
from the insured vehicle after unloading there
from by any person other than the driver or
attendant of such vehicle
12/18/2020 95
• The reason for such exclusion is because of

the potential operation of two different
policies: a motor policy or a public liability
policy.
• This means, there are two areas where the
motor policy will operate, these are:
 The loading, unloading or bringing/taking of a
load is covered when it occurs within the limit of
any carriage way or thoroughfare.
12/18/2020 96
 If it is the driver or attendant of the vehicle who is

bringing the load for loading or removing it after it
has been unloaded, then the loss or damage arising
there from will be covered, wherever the accident
happens.
12/18/2020 97
• The driving other vehicle's extension is not

available on commercial vehicle policies.
• Granting such an extension would be to

expose the insurer to potential third party
liabilities which can not easily be established
or calculated especially as the choice of
different types of commercial vehicle is
considerable.
12/18/2020 98
• Disabled mechanically propelled vehicle:

 Commercial Vehicle policy excludes any liability
for loss of or damage to any disabled mechanically
propelled vehicle being towed by the insured
vehicle.
• Damage to or loss of property in or on the
insured vehicle:
 This is generally intended to exclude the goods in
transit risk which should be insured elsewhere.
12/18/2020 99
• Liability for death of or bodily injury to any

person or damage to property directly or
indirectly caused by or through or in
connection with or arising from:
Any defects in or the action of any Commodities or
goods or any thing transported by or disposed of
from the insured vehicle.
12/18/2020 100
General Principles of Rating and Underwriting
• The accurate rating of risks can make the

difference between profit and loss for an insurer.
• Setting too low a rate for a particular type of
motor insurance risk will result in a loss for each
policy written and will lead to a flood of similar
non-profit making business.
• Conversely, a higher rate than is warranted will
lead to potentially profitable business going to a
cheaper competitor.
12/18/2020 101
• The process whereby the market place will
seek out and exploit weaknesses in rating
structure is known as selection and can
destroy an insurance company.
• Rating is based upon experience:
 Experience of the particular Company
 Experience of the market as a whole
 In order to maximize the accuracy and therefore
the benefits it is essential that data is held
electronically in a format that will allow
12/18/2020
sophisticated analysis. 102
• An insurance premium is made up of a
number of elements:
 The amount that is required to pay Claims
 An allowance for Variable costs – e.g. commission
 An allowance for fixed costs – operating costs of
the company such as staffing, premises, IT
equipment, etc.
 An allowance for profit margin
 Less of course investment income
12/18/2020 103
Each component of the future premium is projected
from the past data
Let us see how the amount that is required to pay
claims component is projected
12/18/2020 104
• The amount that is required to pay Claims:
 The average claims cost(both paid and o/s).
 For reasonability of o/s claims, analyze the run-off
history
 Plus inflation adjustment
 Plus IBNR reserve
 Plus IBNER reserve
 Plus reopened claims reserve
 N.B. this component of the premium is called the
risk premium
12/18/2020 105
• The combined effect of claims cost plus
commission plus expenses are known as the
combined operating ratio. Ideally the
combined ratio should be such as to provide
an underwriting profit, i.e., a combined ratio
of less than 100%.
• Motor insurance is a highly competitive area
and therefore premium rates are often set
according to market conditions rather than
purely on the basis of the risk run.
12/18/2020 106
• The overall rate for any one policyholder is
made up of numerous smaller rates allocated
to rating factors.
• The more these individual risk factors can be
defined and the corresponding rate
understood, then the more accurate the end
premium calculation will be.
12/18/2020 107
• The following tend to be the main rating
factors for motor insurance:
– Vehicle to be insured
– Proposer and other drivers
– Geographical area of use and/or garaging
– Use to which the vehicle is put
– Cover required
12/18/2020 108
• The Vehicle to be Insured:
• The main features that differentiate vehicles
for the purpose of rating are;
– The power to weight ratio - the power to weight
ratio can be determined from manufacturer
information and will give a good indication as to its
performance
– The cost of repairing accidental damage
12/18/2020 109
• Factors which affect cost of repairing
accidental damage are:
– Extent of damage likely to be sustained in an
accident
– Availability of parts
– Likelihood of accident – e.g. some vehicles are more
susceptible to theft
– Modification to cars – modifications which enhance
performance and modification that affect repair cost.
12/18/2020 110
• The age of the vehicle – when vehicles
become older, the likelihood of accident due
to mechanical failure or breakdown and the
extent of damage will increase.
• Value of vehicle -
12/18/2020 111
• Security devices – with the ever-increasing risk of
theft, insurers are willing to grant premium
discounts fro security devices.
• Some insurers may in fact insist upon certain levels
of security before granting theft cover
• Mechanical immobilizers, electronic tracking devices
and alarm systems are some of the security devices.
• These security devices must be approved before
discount are provided
12/18/2020 112
• The Geographical Area of use and/or
Garaging
– The area in which the vehicle is used makes a
difference to the risk.
• In heavily populated areas, there is more
chance of collision.
• On the other hand, there is a less chance of
collision where there are fewer cars on the road.
12/18/2020 113
• The use to which the vehicle is put
– It is obvious that the more a vehicle is used, the
more chance it has of being involved in an
accident.
– Details of use to which the car/vehicle will be put is
thus important.
12/18/2020 114
• The Cover Required:
– Basically there are four levels of cover:
• Traffic Act Cover
• Third Party Only Cover
• Third Party Fire and Theft
• Comprehensive
– The wider the cover, the higher the premium to be
charged.
12/18/2020 115
Some Provisions on Motor Insurance
No Claims Discount (NCD):

• NCD is a reward granted to policyholders who
have not made a claim upon their policy during the
preceding period of insurance, normally twelve
months.
• Originally NCD was introduced in order to
encourage loyalty. On the premise that it is cheaper
to renew a policy than to take on a new one, then it
is worth offering a loyalty bonus in an effort to
secure renewal
12/18/2020 116
NCD cont…
• However NCD is now a mobile commodity,

with all insurers willing to accept other
insurers' proof of claims-free years which will
then be applied to their own NCD scale.
• Nowadays, it is usual to have a so-called
reversionary scale which sees the NCD 'Step
back' say by two years for every claim made
unless more than one claim is made with in a
year.
12/18/2020 117
Suspension of Cover for lay-up
• Although rare, there might be periods when a

vehicle is not being used; for example, an
insured may carry out a major repair himself
and so can not use the vehicle.
• Provided that the period is sufficiently long,
the policy will be extended for the same
number of weeks or pro-rate credit is allowed
and may be deducted from the next renewal
premium.
12/18/2020 118
Suspension of Cover Cont…
• To qualify for suspension of cover for lay-up:

 Notice should be given in writing to the insurer.
 Certificate of motor insurance and Sticker must be
returned to the insurer.
 The vehicle must be laid up off the road for at least
4 and 12 consecutive week for private and
commercial Vehicles respectively.
12/18/2020 119
Suspension Cont…
• The vehicle is not out of use due to damage
or loss for which a claim has been made
under this policy.
• Provided the above three conditions are
fulfilled the policy will be extended for the
same number of weeks.
• Cover may also be reduced to fire, theft and
accidental damage cover if cover was a
comprehensive cover.
• suspension of cover for lay up is not
applicable for agricultural vehicles and Car
12/18/2020 120
Suspension Cont…
• Reinstatement of the policy is always after

conducting pre-risk survey.
• Where the insured decided not to reinstate

the policy, refund at a short period rate may
be applied.
12/18/2020 121
Documentation of Motor Insurance
• Certificate and Sticker Of Motor Insurance:

 In the countries where third party motor insurance
is compulsory, a certificate and Sticker of motor
insurance is required in a prescribed form.
 The layout and content of a certificate Sticker of

motor insurance is prescribed by the regulations.
12/18/2020 122
Documentation…
• The details contained on a certificate

include:
 Certificate number- usually the same as the
policy number
 details of the vehicle covered
 name of the policyholder
 effective date of the commencement of cover
 date of expiry
 Person or classes of persons entitled to drive
 limitation as to use
12/18/2020 123
Documentation…
 a declaration - I/We certify that the policy to which

this certificate relates satisfies the requirements of
the relevant law in Ethiopia.
 signature of the authorized insurer.
 N.B. Certificates can not be issued by
intermediaries, concerns itself solely with the legal
requirements and it can not be backdated.
12/18/2020 124
Documentation…
• Two types of certificates can be issued

relating to details of the vehicle concerned:
 form A: Where the registration number of the
vehicle is stated on the certificate.
 form B: Where the vehicle(s) is (are) referred to
but not specifically identified
 For example, the form B certificate may cover:
 Any vehicle owned by or in the custody or control
of the policy holder (for motor trade risks)
•
12/18/2020 125
Documentation…
Alternatively, the wording may be:

 Any vehicle the property of the policyholder (for
those larger commercial risks where it would be
administratively cumbersome to issue a fresh
certificate for every vehicle acquired by the
insured)
Under the general heading of vehicles covered,

insurers usually include details of any driving
other cars' extension.
12/18/2020 126
Documentation…
• The Temporary Cover Note:

 When a customer wants instant cover and when it is
not possible to prepare the permanent certificate, the
temporary certificate or simply cover not can be
used.
 The cover note has two main functions:
• to provide the policyholder with the main details
of the cover granted whilst awaiting the
permanent documents including the policy itself.
• to act as a temporary certificate of insurance
12/18/2020 127
Documentation
 In order to perform its dual function, the cover

note will contain all of the information shown in
the certificate of insurance and in addition will
have:
• date & time of issue
• date and time of commencement of cover
• any additional aspect of cover such as personal
accident
• the reason for issuing the cover note (new
business, change of car)
12/18/2020 128
Some of the General Exceptions
• The company will not be liable to make any
payment in respect of:
• Any accident, loss, damage or liability
caused, sustained or incurred:
 Outside the territorial limit of Ethiopia
 Whilst any motor vehicle described in the schedule
is engaged in racing, pace making, reliability trial
or speed testing or for any purpose in connection
with the motor trade or whilst the insured motor
vehicle is being used other-wise than for the
purpose mentioned in the schedule.
12/18/2020 129
Some of the General Exceptions …
• Whilst the driver of the insured motor vehicle is

under the influence of intoxication liquor or drug.
• Any contractual liability
• Loss of or damage to the insured motor vehicle or
any form of liability attached whilst the motor
vehicle insured under this policy is being driven by
any person who has no driving license permitting
him to drive the insured motor vehicle or is
disqualified from holding or obtaining such license.
12/18/2020 130
• Any damage or liability directly or indirectly

proximately or remotely occasioned by or
contributed by or traceable to or arising out
of or in connection with flood, typhoon
hurricane, windstorm, volcanic eruption,
earthquake or other convulsion of nature.
12/18/2020 131
• War, invasion, act of foreign enemy, hostilities or

war-like operations (whether war be declared or
not) civil war, mutiny, riot, strikes, civil
commotion, military or popular rising,
insurrection, rebellion, revolution, military or
usurped power, martial law or state of siege armed
or unarmed robbery shifta action, hold-up or any
act of banditry or any of events or caused which
determine the proclamation or maintenance of
marital law or state of siege.
12/18/2020 132
• Loss of or damage to the insured motor
vehicle or any form of liability whilst the
insured motor vehicle is towing any disabled
mechanically propelled motor vehicle.
• Any loss, damage or liability whether caused

by overloading or strain or the number of
persons exceeding the seating capacity of the
motor vehicle described in the schedule of the
policy as specified in the ownership booklet
issued by the licensing Authority or not.
12/18/2020 133
• Loss of or damage to the insured motor

vehicle or any form of liability whilst the
insured motor vehicle is towing any trailer
not specifically insured under this policy or
any disabled mechanically propelled motor
vehicle(applicable only to commercial motor
policy).
• Death or bodily injury or damage to property
or damage to the insured motor vehicle
caused by or arising out of the explosion of a
boiler or air pressure vessel forming part of
12/18/2020 134
• Loss or damage arising from confiscation,

requisition or destruction of the insured
vehicle by or under order of any government,
public or local authority.
• Help or recovery if the motor vehicle is partly
or completely buried in snow, mud sand or
water.
• Deliberate or intentional loss or damage
caused by anyone insured under this policy.
12/18/2020 135
• any liability, loss, damage, cost or expense

while any insured motor vehicle is being
used on any part of an airport;
 to which aircraft have access including areas used
for takeoff, landing, moving or parking of aircraft,
used for ground equipment parking areas and
service roads.
 Used for customs examination.
12/18/2020 136
• Costs resulting out of the insured’s criminal

or illegal act, circumstances where the
convicted offence is one where the court has
the power to impose a sentence of
imprisonment.
• Any liability, loss or damage arising from a
prohibited act by the national law of the
country.
12/18/2020 137
General Conditions
 Conditions preceding the accident – are those

which must be met before indemnity can be
considered. For example, the policyholder must
take all reasonable steps to protect the insured
vehicle from loss or damage and keep in a road
worthy condition.
 Conditions subsequent to accident – are those
obligations which compliance is required after the
insured event is materialized.
12/18/2020 138
General Conditions…
• Care of motor Vehicle

• Policy Cancellation:
 The insurer may cancel the policy by sending
fifteen days notice to the insured and in such event
will return the premium less the pro-rata portion
for the period the policy has been in force provided
any certificate is returned to the insurer.
12/18/2020 139
Policy cancellation…
 The policy may also be cancelled at any time by the

insured by a written request (provided that no claim
has arisen during the current period of insurance and
the certificate is returned) the insured shall be entitled
to a return of premium less premium at the short
period rate.
• Conduct of Claim
• Fraud:
• Contribution for betterment
12/18/2020 140
Renewal of Motor Policy
• Insurers place a great deal of importance upon the

renewal of policies.
• It is considerably more cost effective to renew a policy
than take on a new one.
• There is a comfort in having a known risk for a year or
more.
• RENEWAL RETENTIONS :
 Renewal retention, i.e. the percentage of policies renewed to the
total renewable policies is a very important measure of an
account and over the years numerous renewal retention
schemes have been devised.
12/18/2020 141
RENEWAL…
• Some of those renewal retention schemes are:

 NO CLAIMS DISCOUNT
• One of the earliest renewal retention devices was
the introduction of NCD which was followed
some years later by protected and guaranteed
bonuses (once NCD had reached its maximum,
the policyholder is allowed two claims with in
five years without loss of NCD. This benefit is
usually at an additional premium)
12/18/2020 142
RENEWAL…
 Long term contract:

• This is a contract for, say three years with
penalties incorporated for early termination.
• This is used mainly for commercial motor
policies.
12/18/2020 143
• Renewal System:
 Each insurer will have developed a list of criteria
that will be used to determine the extent to which
renewal will be offered on ‘standard’ terms.
 ‘Standard’ in this context refers to the situation
that would obtain if renewal of the policy were
offered at the terms automatically generated for
that risk by the insurer’s computerized system.
12/18/2020 144
Renewal…
 There are a number of reasons why an insurer may

not wish the offer of renewal to be an automatic
process:
 Consider the following situation:
• When a risk was originally proposed, there was
a history of motoring convictions and the
underwriter felt it prudent to impose a
substantial own damage excess and a modest
premium loading. Two years have now passed
without any claims incidents and no further
convictions.
12/18/2020 145
Renewal…
If the insurer takes no action it risks losing the

business to a competitor.
It follows that a system is needed to review such
cases.
12/18/2020 146
Renewal…
• Features that will give rise to special
consideration at renewal fall into the
following categories:
 Aspects of the risk that have changed since the
renewal date. This would include high claims
frequency or claims value, convictions notified,
new aspects such as a new driver to be added.
 Aspects of the risk that have been present for at
least one year and which have either attracted
special terms in the past or place the risk in a non-
preferred category.
12/18/2020 147
Renewal…
• Other features of motor insurance renewal

procedures that need to be considered are:
 The renewal notice issued by the insurers will
indicate the degree of NCD entitlement achieved
by the insured ,and should the latter wish to place
their business with another insurer they will need
their existing insurers official renewal notice to
serve as proof of the entitlement. Often insurers
will indicate on their renewal documents simply the
number of claim-free years plus the net premium.
12/18/2020 148
 Each renewal of motor insurance is a new contract
and, therefore, the duty of disclosure will apply to any
material fact of which the insurer is unaware. This
means that full details must be given such as
conviction or accidents which have occurred to any
of the regular drivers of the vehicles and, in
addition, specific details must be given if a young
person has begun to drive the vehicle.
12/18/2020 149
CLAIMS
MANAGEMENT
12/18/2020 150
Claims
• What is a Claim?
 A Claim is a request for reimbursement (or
compensation) by the insured and addressed to the
insurer.
 A claim can be made (i.e. notified) without an
insured loss event is happening. In such a case, the
claim would be invalid.
12/18/2020 151
Claims…
• What is a loss?
 A loss is the occurrence of an insured event, such
as an overturning of the insured motor vehicle
which results in financial disadvantage for the
insured.
 It is the time where the value of the cover and the
claims service is put in to test.
12/18/2020 152
Claims…
• The roles of the claim department are to:
 provide a swift, efficient and technically
knowledgeable claims service
 indemnify the policyholder in accordance with the
cover purchased
 ensure that only valid claims are paid
 consider and if appropriate, deal with third party
claims whilst protecting the policyholder's interest
 protect the fund of premiums against overpayment,
fraud and expenses incurred due to inefficient
claims - handling processes.
12/18/2020 153
Claims…
• Claims Process:
• The various stages in the claim process are:
 Event giving rise to the claim:
• As stated above this may or may not be an
insured loss event.
12/18/2020 154
Claims…
• Claims Notification:
 This is the reporting (in the prescribed format, e.g.
by filling in the claim form supplied by the insurer)
of the claim by the insured to the insurer. Ideally,
the claim details will be sufficient to meet the needs
of the insurer and all appropriate documentation
will be enclosed.
 The purpose of this condition is to enable the
insurer to take steps to investigate claims in order
to minimize its exposure under the policy
12/18/2020 155
Claims…
 It enables loss adjusters and lawyers to be

appointed and generally allows the
circumstances to be investigated so that detailed
evidence is not lost.
It also gives insurers the opportunity of
investigating possible recoveries from third
parties (the third party refer to anyone other
than the insured who is involved in a loss event).
12/18/2020 156
Claims…
• Claim Review:
 This involves the analysis of the claim by the
insurer in the light of such things as:
• the appropriateness of the amounts claimed
• the proposal form, e.g. whether the claim
contradicts earlier statements.
• the exact terms of the policy
• legal requirements
12/18/2020 157
Claims…
• economic considerations such as the internal

cost of pursuing extra documentation of
entering in the correspondences with the
insured compared to paying a small claim
• market practice
 As can be seen, some factors may conflict with
each other such as the exact term of the contract
and economic considerations; legal requirements
and market practice.
 Claims review is therefore a key stage in the
process.
12/18/2020 158
Claims…
• Response to Claimant
 The initial response from the insurer to the
insured may be only an acknowledgement and a
request for further information. Depending upon
this further information, the insurer must then
convey their "Claim decision' which can be one of
three choices:
• payment, i.e. acceptance of the claim in broad
terms;
12/18/2020 159
Claims…
• negotiation, i.e. the offer of a lower amount than

that claimed or an offer to enter into
negotiations with the insured with no amount
initially named. In this situation, liability is
accepted by the insurer and the quantum of the
claim is the only point in dispute
• rejection, i.e., liability is not accepted by the
insurer.
12/18/2020 160
Claims…
 In the case of both negotiation and rejection, the full

reasons for the decision should be stated. This allows
the insured to understand the decision and to
challenge it if the arguments are flawed (defective).
12/18/2020 161
• Claims Investigation
– In many cases, such as motor accidents, the
insurer will not be in a position to make a claim
decision before the full facts surrounding the claim
are available. In order to establish such facts, it
may be necessary to instruct an internal claims
inspector to under take further investigations or
they may appoint loss adjusters who undertake an
independent investigation into the claim and write
a report of their findings for the insurer.
•
12/18/2020 162
• Claims Negotiation
 Armed with the full facts of the case, the insurer
may decide that a lesser amount should be offered
than that originally claimed. For example, the
insurer may believe that part of the damage to the
car was caused prior to the occurrence of the
insured event.
12/18/2020 163
• Claims Settlement
 This stage may quickly follow the response to the
claimant in the case of simple claims, liability for
which is immediately accepted by the insurer. On
the other hand, claim settlement may be delayed for
some time in the case of claims where liability is
initially denied, then subsequently negotiated.
12/18/2020 164
• Claims Recoveries
 Following payment of the claim, it is often the case
that the insurer will be able to recover part of the
outlay from other sources:
• From third parties considered liable for the insured
event by exercising their subrogation rights
• From salvage disposal
• from reinsurers if the claim fall above the priority.

12/18/2020 165
• Review of Performance
 This will only be carried out in respect of sample of
claims, plus any large or particularly problematic
claims. The idea is to ensure that:
• Standards of service are being maintained
• Internal decisions were correctly made
• Any reserves still attaching to claims reflect the
current positions of the claim in line with the
corporate reserving policy
• To see if anything can be learned from the
experience.
12/18/2020 166
Own Damage Claims
• It is in this area where claims service is at its

most critical. Vehicle, some of which may be
used for business, may be out of commission.
In any event, policyholders do not want their
expensive vehicles to be unsightly due to body
damage and will expect speedy repair or
replacement.
• The repair process starts with one or more
(other than the Company's Survey) repair
estimates from local repairers.
12/18/2020 167
• Approved Repairers
 Insurers have always been aware of the repairers
in any locality that are likely to give a quality and
speedy service at a reasonable price.
 They will also know which repairs can be trusted.
 Over the last decade or so insurers have
endeavored to formalize this situation by providing
recommendation and/or approval to a panel of
repairer.
12/18/2020 168
• Panels of Approved Repairers
 The size of the panels of repairers is critical.
• There need to be sufficient numbers and geographical
spread in order to satisfy the needs of the insurer's
portfolio of motor policies.
• If there are too many repairers on the panel, then the
work will be dissipated and the benefits or volume
business will be lost.
 Repairers must work to certain standard and possess all
essential equipment in order to carryout repairs to
manufacturer's tolerances.
12/18/2020 169
Theft Claims
 The handling of theft claims differ from other
own damage claims in important ways.
 This arises from the fact that there is a
tendency for many vehicles, reported as
stolen, to be recovered with in a matter of
days or weeks of the theft.
 If the vehicle is recovered in a damaged state
the insurer will proceed with the settlements
of the claim in the usual way.
 If the vehicle is not recovered there may be
some doubt as to the pre-theft condition of
12/18/2020 170
• It is always necessary for the theft to be
reported to the police (by the terms of the
policy).
• Insurers will customarily wait for a period of
approximately six to twelve weeks before
treating the theft as permanent.
• Once the claim is settled a discharge form is
required from the insured stating that if the
vehicle is subsequently recovered it will either
be treated as salvage belonging to the insurer
or the claims money will be returned and the
12/18/2020 171
Salvage
• If a claim is settled on total losses basis, then

the insurer will invariably retain the salvage
and will sell it to defray costs.
• The market for salvage is vast:
• many of them are broken for spares or crushed,
• a great number of other vehicles are successfully
passed through trade, repaired and put back on the
road in a safe condition.
12/18/2020 172
• Motor vehicle salvage is unfortunately an
opportunist’s source for fraud:
 The identify of broken or crushed vehicles may be
taken and used on stolen vehicles;
 vehicles may be cheaply and unsafely repaired
before being sold on with the history hidden
 salvage may be re-used in insurance accident or
theft claims.
12/18/2020 173
Third party property claims
• It is evident that where damage to two or

more vehicles is involved, the question of
liability for causing the accident is important,
especially in the absence of an agreement.
• When receiving notification of a claim of this
type, the first step the insurer will take will be
to investigate the circumstances surrounding
the accident.
12/18/2020 174
Third Party Property…
• The insurer will, wherever possible, seek
statements from independent witnesses.
• At this stage, the claims official should
attempt to clarify any conflict of evidence that
might exist.
• He should also inspect the scene of the
accident.
• If the accident has been reported to the
police and there is a third party claim, it is
important to obtain a copy of the policy report
if possible, in order to compare the statements
12/18/2020 175
• Accidents tend to be of two different types:

 Those where one driver was wholly responsible.
 Those where the negligence of two or more drivers
probably contributed.
 In multi-vehicle accidents, insurers will usually
encourage each policyholder insured
comprehensively to claim under his own policy and
then, privately settle the question of liability
between them.
12/18/2020 176
• In doing that, they will be concerned to do two

things:
 not to prejudice any action which their own
policyholder may be taking in respect of his own
uninsured losses: his policy excess, the cost of hiring
a vehicle whilst his being repaired and the like.
 to form an opinion on the effect of the claim on
their own policyholder’s NCD. If their policyholder
successfully recovers his uninsured losses in full,
insurers will not allow the claim to prejudice NCD.
12/18/2020 177
 Once liability has been established, the next stage

is to translate this into a monetary amount for
repair.
 The procedure for approaching repair estimates
may follow a similar pattern to own damage
claims.
 Third party claims should be settled by cash.
12/18/2020 178
Third Party Personal Injury Claims
• Third party personal injury claims are more

complex and expensive to settle than other
type of motor claims.
• Once the degree of negligence has been
established, the next stage is to ascertain the
extent of the injury, the prognosis and the
number of dependants.
•
12/18/2020 179
TP Personal…
• Minor injuries, with little likelihood of
causing further problems, can be settled
comparatively easily.
• More severe injuries might take a long time
to settle, because of the natural reluctance of
legal advisers of injured plaintiffs or injured
plaintiffs themselves to agree settlement until
the full consequence of the injuries is well
established.
• Hence such types of claims will continue as
outstanding for a long period than other
12/18/2020 180
Dispute Resolution
• Although insurers genuinely endeavor to

provide a fair and efficient service, there will
be an issue of dispute.
• The vast majority of disputes arise at:
 claims time with disagreements relating to cover
and quantum,
 premium,
 NCD etc.
12/18/2020 181
Dispute…
There are many practical dispute resolution

methods. Some of these are:
• Arbitration
 Where the dispute relates to quantum issues
arising under the own damage parts of the policy,
insurers usually incorporate in their policies an
arbitration clause.
 Arbitration is not inexpensive but is likely to be
less expensive and less stressful than a court of law
•
12/18/2020 182
Dispute…
 It is seldom desirable to take a dispute to either

arbitration or court. In the end, the cost can be
considerable and it is unlikely that either party will
be fully satisfied.
 Insurers, therefore, take every care to set up an

internal complaints procedure that, hopefully, will
cater for the majority of disputes.
12/18/2020 183
Dispute
Internal Complaints handling Procedure:

 The procedure is normally incorporated in the
policy wording
12/18/2020 184
Dispute…
• Alternative Dispute resolution (ADR)

 ADR is a method that has been formulated
primarily to lighten the case load of courts of law.
 It is a less formal procedure where the ultimate
solution determined by the parties themselves
through mediation rather than by any judge or
arbitrator.
12/18/2020 185
Dispute…
 It is a generic term for a non contentious method

of resolving disputes, without the need to litigate,
although it does not prevent this course of action if
one or both of the parties wishes to take such
action.
 A mediator is appointed by mutual consent.
 It is the job of the mediator to facilitate discussion
through a series of meetings and to encourage the
parties to bring various aspects of the dispute to a
point where there is mutual understanding and
acceptance.
12/18/2020 186
Dispute…
• The solution is often a compromise which is

acceptable to both parties.
12/18/2020 187
• Thank you!
12/18/2020 188

Motor Insurance

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MOTOR INSURANCE

PRINCIPLES OF RATING & UNDERWRITING

 Key issues relating to claims arising under motor insurance.

• It was designed by Wilhelm Maybach & Paul

• The symbol of modern road transport, the

BEGINNINGS OF MOTOR INSURANCE

• Mass production of the auto industry and the

• In addition to the private individuals,

• Safety features were increasingly seen to be of

• As far as the Ethiopian experience is concerned, records

This part of the presentation is concerned with

• The law first proclaimed in 2008 under

• The experience gained during its application

• Compulsory third party motor insurance is

• In the UK Road Traffic Act in 1930(RTA)

• The rational behind the statutory

- loss of lives, bodily injuries and damage to

• Under Proclamation No.799/2013 no person

 Compulsory(Obligatory)Third Party Motor

• This is the minimum cover provided by motor

• Cover will apply to incidents which occur on

Article 2 (9) of the Proclamation defines "road” as

Basic compulsory policy provides the following cover:

Compensation for disability up to Birr 40,000 per person Birr

Medical Expense up to Birr 40,000.00 which will be deducted

– Emergency Medical Treatment up to Birr 2,000 per person

• Legal costs incurred in defending an action

There are certain Exclusions:

• Most of the policy exclusions and conditions not

 This cover will extend the third party liability cover to

• Under TPO policies, off the road cover is also

• TPO cover on private policies has a well known

• The extension applies when the insured vehicle

• The wording is as follows:

• This policy extends a third party cover to incorporate

• Such a policy will provide indemnity for loss of or

• Nowadays, most private car policies will provide

• Under the motor cycle policy, theft of such

• Accessories and spare parts are specifically for

• It is a comprehensive policy which provides the

• The term comprehensive can be a little misleading in

• The intention is to provide cover for accidental

• What is covered under Comprehensive

 by fire, external explosion, self ignition, lightning

 theft or attempted theft

• whilst in transit (including the process of loading and

• Impact damage caused by falling objects

• The Insurer will either:

• The maximum the insurer will pay is the

• Market value is the amount that it would cost

• Repair cost must be less than or equal to the

• Repair Cost <= SI/MV – estimated Salvage

• An insurer will often pay the pre accident

• The cash payment option is not particularly

What is not Insured

• Any reduction in the market value of your vehicle following any

• Loss of or damage to telephone or communication equipment of

• Loss or damage as a result of deliberate act by the insured

• Accessories are those items which are

The terms of an excess clause give the insurer relief

An excess amount must be practical and beneficial to

• The purposes of the excess are as follows:

 To make the insured his own insurer for the specified