Complete information on the Procedures of Motor Insurance

Complete information on the Procedures of Motor Insurance

The proposal form is completed for making proposal for motor insurance. The form is divided into three parts:

(i) Identification of vehicles registered number, horse-power shape and size, model, etc.

(ii) Risk-information past insurance, type of policy got previously, equipments, vehicles.

(iii) Declaration: The declaration of true and full statement of the questions is made at the end of the policy.

Rating the Motor Insurance :

Since the motor insurance is subject to tariff, basic premium is determined by the tariff association. Additional premium is added to the basic premium on the basis of shape, size, horse power, use, value of the motor car, etc.

The higher the risk, the more will be the amount of premium. Rebate in premium is allowed if the insured has more than one car, is a member of Automobile Association and there was no loss in the previous years. The car was under the personal use and care of the owner.

Issue of Policy :

As soon as the proposal form is accepted, cover note is issued. The cover note is a certificate of insurance although it cannot be used as a proof of insurance in a court of law. As soon as the policy is issued the cover note is cancelled.

Term of Insurance :

The motor insurance policy is issued generally for one year. However, the policy can be issued for less than one year but the premium rate will be higher, e.g., the premium rate is three-fourths of annual premium of the policy issued for six months.

Additions of Benefits :

During the currency of policy, after payment of extra-premium additional benefits can be added to the original policy. Thus additional risks can be included to the original policy.

Change of Vehicle :

The insured vehicles can be disposed of along with the policy. The term of policy will remain the same. The policy will continue up to the unexpired period with the purchaser of the car. Similarly the insured can replace another car under the same policy.

Furlough Concessions:

When risk is reduced, the proportionate share of premium is returned or the period of coverage is extended by the excess premium. This is called ‘furlough concessions’.

Settlement of Claims:

As soon as the damage occurs, notice of that is given to the insurer. The evidence or eye-witness should be placed to the insurer.

When the insurer is satisfied with the notice and evidence, he can issue claim form which is returned to the insured after completing it in all respects. Personal injury is also made in connection with the personal injury, damage to property, defense and prosecution.

Negligence of the Parties:

The insurer will pay the amount of liability only when the insured is at negligence. In other words, the insurer shall pay only when the insured not legally liable for indemnification to third party.

Knock for Knock Agreement :

This clause says that the liability of the insurers will be limited only to the liability to the insured. In this case the third party liabilities do not arise.

Halving Agreement :

Under this agreement the loss of both partners (insured) and third party and is equally divided amongst the insurer.

Private Car :

Cover is granted against the loss of or damage to motor car and its accessories whilst thereon, anywhere in India, caused by any of the following perils:

1. Accidental, external means

2. Fire

3. External explosion

4. Self-ignition.

5. Lighting

6. Frost

7. Burglary, house breaking or theft, and

8. Malicious act.

The cover is also operative whilst the car is in transit by road, rail, in land, waterway, lift or elevator.

The following are excluded.

(i) Consequential loss;

(ii) Depreciation;

(iii) Wear and tear; and

(iv) Mechanical or electrical breakdowns, failures or breakages.

Damage to types is ordinarily not payable. If, however, the insured car is also damaged at the same time, the damage to types is payable but the amount payable in that event is limited to 50% of the cost of replacement of the types.

The exclusion applies to damage to types and, therefore, losses of types due to theft is payable.

If the motor car is disabled as a result of damage covered by the Policy, the insurers bear a reasonable cost of protecting the car and removing it to the nearest repairs, as also of redelivery to the insured. The amount so borne by the insurers is limited to Rs. 150 in respect of any one accident.

Normally, repairs arising out of damage covered by the policy can be carried out only after they are authorised by the insurers. In terms of this section of comprehensive policy, the insured may authorise the repair to the car provided that:

(a) The estimated cost of such repair does not exceed Rs. 300;

(b) The insurers are furnished forthwith a detailed estimate of the cost; and

(c) The insured gives the insurers every assistance to ensure that such repair is necessary and that the charge is reasonable.

Section II :

It provides for the cover in respect of liability to the third parties.

Section III :

If any bodily injury is caused to the insured or to any occupant of the motor car by violent accidental, external and visible means, as the direct result of an accident to the motor car, and if the insured incur medical expenses for the treatment of such injury.

The medical expenses reasonably incurred by the insured in this behalf are reimbursed to him, subject to a limit of Rs. 350 in respect of any accident. A notable feature of this provision is that insured car must meet an accident in order to attract the benefit.

General Exceptions :

The insurer is not liable under the policy in respect of:

(i) Any accident, loss, damage and liability caused, sustained or incurred outside the Geographical Area specified in the schedule of the policy, i.e., India. On request it can be extended to Nepal, Sikkim and Bhutan.

(ii) Any claim arising out of any contractual liability. If, however, the liability arises independent of the contract, the claim is payable.

(iii) Any claim arising whilst the vehicle is being:

(a) used otherwise than in accordance with the limitations as to use specified in the schedule of the policy; or

(b) Driven by any person other than a driver described in the schedule of the policy.

(iv) Any claim arising after any variation in or termination of the insured’s interest in the vehicles.

(v) Any claim directly or indirectly arising from:

(a) Ionizing, radiations or contamination by radio-activity from any nuclear waste from the combustion of nuclear fuel.

(b) Nuclear weapons material.

(c) Flood, typhoon, hurricane, volcanic eruption, earthquakes or other convulsions of nature.

(d) war, invasion, act of foreign enemies, hostilities or war-like operations, civil war, strike, riot, civil commotion, invasion, rebellion, military or usurped power.

(e) Driving of the car under the influence of intoxicating liquor or drugs.

(vi) This does not cover use for hire or reward or gaining, pace-making, reliability trial, speed testing, the carriage of goods (other than samples) in connection with any trade or business or use for any purpose in connection with motor trade.

Extra Benefits :

The policy may be extended to cover the following extra-benefits. On payment of additional premium:

(i) Accidents to insured or any named person (not less than 16 not more than 65 years of age) other than a paid driver or cleaner. This provide for specified scale of benefits in the nature of personal accident cover.

(ii) Accidents to insured and wife. Benefits and limits are similar to above. In the event of both the insured and his wife being in the same car at the time of an accident the benefits will apply to insured and his wife to the extent of 50% only.

(iii) Accidents to unnamed passenger other than insured and his paid driver or cleaner. The benefits and age limits are similar to (i) above.

(iv) The legal liabilities to employees of the insured who may be travelling in or driving the employer’s car (other than paid drivers).

(v) Business use by fellow employers. The policy extends to include use by persons other than insured for the business of the insured’s employer and to indemnify such person. The additional premium depends upon whether use of one named person or use by unnamed is desired.

(vi) Accident to soldiers/sailors/airmen employed as by officers in their private capacity.

(vii) Trailers. Trailers may not be insured separately and the cover on the trailers must correspond to the cover on the car.

(viii) Riot and strikes.

(ix) Earthquake (fire and damage),

(x) Flood, inundation, typhoon and hurricane.

(xi) Rugs, coats and luggage.

(xii) Legal liability of passengers for acts of negligence; and

(xiii) Reliability trials and rallies.

Commercial Vehicles :

The following points of difference between this policy and private car policy comprehensive policy should be noted:

(a) Loss of or damage to the vehicle and its accessories whilst thereon is not covered.

(i) Against the risk of frost.

(ii) If loss or damage is due to overloading or strain or by explosion of the boiler or the motor vehicle.

(b) Loss or damage to accessories whilst on the vehicle is covered against the risk of burglary, house-breaking or theft only if the vehicle is stolen at the same time.

(c) The insured can authorise repairs if estimated cost of repairs does not exceed Rs. 150 (against Rs. 300 in the case of Private Car).

(d) There is a compulsory excess for each and every claim in respect of goods carrying vehicles, taxis or private car type vehicles plying for public hire and public passenger service vehicles, buses and motorised rickshaws.

(e) Loss of or damage to type, lamps, bumpers, mudguards and Painting of vehicles is not covered except in case of total loss.

Application of Limit of Indemnity :

It is provided that if out of an accident indemnity is available to more than one person the limit of- indemnity prescribed by the policy applied to the total of the amounts payable to all eligible persons arid if the limit is less than the total of the amounts due, the insured will have priority, in indemnification.

For example, if an indemnity of Rs. 40,000 is due to the insured and of Rs. 20,000 to some other person against a limit of Rs. 50,000 under the policy, the insured will be paid Rs. 40,000 first and only the balance of Rs. 10.000 will be paid to the other person.

Motor Cycle :

Under this policy following points should be noted:

(i) The cost of removal, etc., in one event of an accident is limited to Rs. 50; (ii) The amount up to which the insured is authorised to repair is specified at Rs. 50; and (iii) The polices covering motor scooters are made subject to an excess of Rs. 50 for each and every claim.

The liability in respect of death or bodily injury to any person being conveyed in or on the motor cycle is excluded. Such liability is, however, covered if the said person is being conveyed by reason of or in pursuance of a contract of employment in terms, and subject to, limitation of indemnity.

Under this section the insured individual is indemnified whilst personally driving a motor cycle not belonging to him and not hired to him under a Hire Purchase System. The extension, however, is not available for policies issued in respect of auto-cycles or mechanically assisted pedal cycles.

Extra Benefits :

The following extra benefits may be granted on payment of additional premium:

(a) Increase in the limit of indemnity for liability to public risks can be effected;

(b) full liability under Workmen’s Compensation Act, 1923, Indian Fatal Accidents Act or at Common Law for accidents to paid driver, cleaner or conductor can be covered on payment of extra annual premium per head of Rs. 5; and

(c) In the case of vehicles plying for hire-(i) legal liability for loss or damage to goods caused by accident whilst being conveyed on the insured vehicle can be covered; (ii) Fire risk whilst vehicle is garage can be covered.

Underwriting Considerations :

Relating to the insured and driver. The insured himself presents a great hazard in Motor insurance; he is likely to be the principal driver, particularly in private cars. Besides he will have a good deal of influence in the selection of other drivers.

If the insured is a firm, the underwriter may have to examine the policy of the proposed firm in the matter of selection of drivers.

The business or profession of the insured is another important consideration, because this would show how, where and to what extent the vehicle will be used.

The nationality of the proposer is an underwriting consideration because:

(i) Foreigners are not accustomed to the local road and traffic conditions;

(ii) It is not always possible to ascertain their (insurer) history and driving experience;

(iii) In the event of an accident, they may not be available when they are required as witnesses for their own defense; and

(iv) Language difficulties may make them unsatisfactory witnesses.

Age of the driver is also important as very young persons are prone to accident as well as very old persons. The physical condition of the driver should also be considered when underwriting the risk. All convictions for driving offences are also material facts and must be reported to the insurers.

The underwriter may ignore a series of convictions for minor offences but may take serious note of a single conviction for a major and dangerous offence. Drunken drivers have always been posing a serious problems to the under writers.

After examining the proposal and assessing the risk, the underwriter will decide on anyone or more of the following lines:

(i) accept the risk at normal terms,

(ii) Increase the premium,

(iii) Impose a compulsory excess in respect of each and every loss, under one or more sections of the policy,

(iv) Restrict the cover to third party, fire and theft risk only,

(v) Restrict the cover to third party risk only,

(vi) Restrict the cover to act liability only, and

(vii) Decline the risk. The declinature is, however, resorted to in exceptional circumstances only.