MOTOR INSURANCE - National Institute of Open …

1 MODULE - 4 Practice of General InsuranceNotes 41 MOTOR InsuranceDIPLOMA IN INSURANCE INTRODUCTIONThis is the class of INSURANCE through which a majority of thepeople recognize general INSURANCE and that too because it iscompulsory for all motorized vehicles to have an Insurancepolicy against third party liability before they can come this class of INSURANCE is the major source of premiumearnings for the INSURANCE companies it is also the class whichis showing the biggest OBJECTIVESAt the end of this lesson, you will be able to:zKnow the meaning of MOTOR insurancezBuy the MOTOR insurancezSettle the claim under MOTOR INSURANCE /Third PartyzKnow what is not covered under MOTOR insuranceFor purpose of INSURANCE , MOTOR vehicles are classified intothree broad categories:(a) Private cars(b) MOTOR cycles and MOTOR scooters(c) Commercial vehicles, further classified into(I) Goods carrying vehicles(II)Passenger carrying vehicles rickshaws-Taxis- Buses3 MOTOR INSURANCEDIPLOMA IN INSURANCE SERVICESMODULE - 4 NotesMotor InsurancePractice of General INSURANCE 42(III)Miscellaneous Vehicles, Hearses (funeral van)- Ambulances- Cinema Film Recording & Publicity vans- Mobile dispensaries TYPES OF POLICIESCAR/VANMC/SCOOTERBUS/ TRUCKHEAVY VEHICLEPvt.

2 Commercial PrivatePrivate CommercialTwo ThreeWheeler WheelerTYPES OF CLAIMSVEHICLEACCIDENT Theft Accident Collision With Other Vehicle Other External Object Fire etc. Own Damage Third Party Total LossCash loss RepairDeathBodily injury Property damage MODULE - 4 Practice of General InsuranceNotes 43 MOTOR InsuranceDIPLOMA IN INSURANCE SERVICESM otor Vehicles Act, 1988It is necessary to have knowledge of MOTOR Vehicles Act passedin 1939 and amended in the old days, many of the pedestrians who were knockeddown by MOTOR vehicles and who were killed or injured, didnot get any compensation because the motorists did not havethe resources to pay the compensation and were also notinsured. In order to safeguard the interests of pedestrians,therefore, the MOTOR Vehicles Act, 1939, introduced INSURANCE of MOTOR vehicles against damage is not madecompulsory, but the INSURANCE of third party liability arisingout of the use of MOTOR vehicles in public places is madecompulsory.

3 No MOTOR vehicle can ply in a public place withoutsuch liabilities which require compulsory INSURANCE are asfollows:(a) any liability incurred by the insured in respect of deathor bodily injury of any person including owner of thegoods or his authorised representative carried in thecarriage.(b) liability incurred in respect of damage to any property ofa third party;(c) liability incurred in respect of death or bodily injury ofany passenger of a public service vehicle;(d) liability arising under Workmen s Compensation Act,1923 in respect of death or bodily injury of:(i) paid driver of the vehicle; (ii)conductor, or ticketexaminer (Public service vehicles); (iii) workers, carried ina goods vehicle;(e) liability in respect of death or bodily injury of passengerswho are carried for hire or reward or by reason of or inpursuance of contract of policy of INSURANCE should cover the liability incurred inrespect of any one accident as follows:(a) In respect of death of or bodily injury to any person, theamount of liability incurred is without limit IN INSURANCE SERVICESMODULE - 4 NotesMotor InsurancePractice of General INSURANCE 44(b) In respect of damage to any property of third party.

4 Alimit of ,000 liability in respect of death of or bodily injury to anypassenger of a public service vehicle in a public place, theamount of liability incurred is 140 of the MOTOR Vehicles Act 1988, provides for liabilityof the owner of the MOTOR Vehicle to pay compensation incertain cases, on the principle of no fault . The amount ofcompensation, so payable, is, ,000/- for death, ,000/- for permanent disablement of any personresulting from an accident arising out of the use of the motorvehicle.(Note: The principle of no fault means the claimant need notprove negligence on the part of the motorist. Liability isautomatic.)Certificate of InsuranceThe MOTOR Vehicles Act provides that the policy of insuranceshall be of no effect unless and until a certificate of insurancein the form prescribed under the Rules of the Act is only evidence of the existence of a valid INSURANCE asrequired by the MOTOR Vehicles Act acceptable to the policeauthorities and , is a certificate of INSURANCE issued bythe insurers.

5 The points covered under a certificate ofinsurance differ according to the type of vehicle TYPES OF POLICIESFor all classes of vehicles, there are two types of Policy Forms:-Policy FormsForm AForm BTo cover Act Liability To cover own damage + Act LiabilityForm A : to cover Act Liability. MODULE - 4 Practice of General InsuranceNotes 45 MOTOR InsuranceDIPLOMA IN INSURANCE SERVICESForm B : to cover Own Damage Losses and Act Liability. Thepolicy can also be extended to cover additional liabilities asprovided in the A is called Standard Form for A Policy for ActLiability . This form applies uniformly to all classes of vehicles,whether Private Cars, Commercial Vehicles, MOTOR Cycles orMotor Scooters, with suitable amendments in Limitations asto Use .Form B , which provides wider cover as indicated above, varieswith the class of vehicle covered.

6 There are therefore Form B Policies for Private Cars, Commercial Vehicles, MOTOR Cycles/Scooters, Form BThis policy provides the so-called comprehensive cover andthe structure of the policy form is the same for all vehicles,(with some differences which are pointed out, whereverapplicable)Section I : Loss or Damage (or Own Damage ). The riskscovered are :a)Fire, explosion, self-ignition or )Burglary, house breaking or )Riot and )Earthquake (fire and shock damage)e)Flood, typhoon, hurricane, storm, tempest, inundation,cyclone, hailstorm, )Accidental external )Malicious ) Terrorist )Transit by road, rail, inland waterway, lift, elevator or )Landslide wear and tear; andDIPLOMA IN INSURANCE SERVICESMODULE - 4 NotesMotor InsurancePractice of General INSURANCE 46iv. mechanical or electrical breakdowns, failures or to tyres unless the vehicle is damaged at thesame time.

7 (Then, 50% of cost of replacement payable).For commercial vehicles, see Compulsory Excess Clausedealt with latervi. Loss when the vehicle is driven under the influence ofintoxicating liquor or drugs(Notes: 1. In the MOTOR cycle and commercial vehicle policythere are additional exclusions :(1) Loss of or damage to accessories by burglary,housebreaking or theft unless the vehicle is stolen atthe same time.(2) In commercial vehicle policy, there is a furtherexclusion: Damage caused by overloading or strainof the ChargesIf the MOTOR car is disabled as a result of damage covered bythe policy, the insurers bear a reasonable cost of protectingthe car and removing it to the nearest repairers, as also thereasonable cost of re-delivery to the insured. The amount soborne by the insurers is limited to maximum of ,500/- inrespect of any one accident.)

8 (Note: For MOTOR cycles the limit is , for cars and for commercial vehicles ).RepairsOrdinarily repairs arising out of damage covered by the policycan be carried out only after they are authorized by theinsurers. However, the insured is allowed to carry out therepairs without authorization from the insurers, provided that:(a) the estimated cost of such repair does not exceed Rs-500/- ( for MOTOR cycles).(b) the insurers are furnished forthwith with a detailedestimate of the cost; and(c) the insured gives the insurers every assistance to ensurethat such repair is necessary and that the charge - 4 Practice of General InsuranceNotes 47 MOTOR InsuranceDIPLOMA IN INSURANCE SERVICESC ompulsory ExcessThis applies to all vehicles. The insured has to bear a part ofthe claim amount in respect of each loss / damage to lamps, tyres, mudguards and / orbonnet side parts, bumpers and / or paintwork is not payableexcept in the case of a total loss of II Liability to Third PartiesThe insurers indemnify the insured against all sums whichhe may become legally liable to any person including occupantscarried in the MOTOR car (provided that they are not carried forhire or reward) by reason of death or bodily injuries caused tosuch third parties or by reason of damage to the property ofthird parties caused by or arising out of the use of the motorcar.

9 The insured s liability for damage to property of thirdparties is limited to ; whilst liability for death of orbodily injury to third party is legal costs and expenses incurred by such third partiesare reimbursed in addition. The legal costs and expensesincurred by the insured are also reimbursed provided thatthey were incurred with the insurer s written insurers are liable for the death of or bodily injury arisingout of and in the course of employment, but only to the extentnecessary to meet the requirements of the MOTOR VehiclesAct. The damage to property is not paid for, if the damagedproperty belonged to the insured or was held in trust by himor was in the custody or control of the insured.(Note: This section is, more or less, the same for all vehicles,subject to some variations for MOTOR cycles and commercialvehicles)Section IIIThis appears in commercial vehicle policies section provides cover while the vehicle is towing onedisabled mechanically - propelled vehicle.

10 It provides that whilstthe insured vehicle is being used for the purpose of towingany one disabled mechanically - propelled vehicle(a) the cover provided by the policy remains operative, andDIPLOMA IN INSURANCE SERVICESMODULE - 4 NotesMotor InsurancePractice of General INSURANCE 48(b) under Section II of the policy, indemnity will also beprovided for the liability in connection with such towedvehicle. This however is subject to the following towed vehicle should not be towed for hire orreward andii. No cover is available under the policy for the damageto the towed vehicle or the property conveyed Exclusions (applicable to all sections)These provide that the insurer shall not be liable in respectof:(a) any accident outside the geographical area specified inthe policy, that is, India.