Independent University, Bangladesh

Teacheth man that which he knew not

Assignment on: Motor insurance

Course Name: Risk & Insurance Management

Course ID: FIN440
influences investment in stock market.
Sec: 1
Date of Submission: 14th November, 2017
influences investment in stock market.

Prepared by:
influencesSakib
investment in stock market.
Zaman- 1420203

influences investment
Submittedin
to:stock market.
Dr. Mohammad Kamrul Hasan

Lecturer

School of Business

1|Page
LETTER OF TRANSMITTAL
14th November,2017
To,
Dr. Mohammad Kamrul Hasan
School Of Business
Independent University, Bangladesh (IUB)

Subject: Motor insurance

Dear Sir,
I am pleased to submit the report that you asked for and gave me the authorization to work on the
Motor insurance. This report is an essential part of the course. I tried my level best to work on
this report carefully and sincerely to make the report informative.

The study that i conducted enhanced myknowledge to make an exclusive report. This report has
given me an exceptional experience that might have immense uses in the future endeavors and i
sincerely hope that it will be able to fulfill your expectations.

I have put all my sincere effort to give this report a presentable shape and make it as informative
and precise as possible. I believe that my tiresome effort will help you to go ahead with the sort
of venture. If you need any assistance in interpreting this report please contact without any kind
of hesitation.

Thanking you

Sincerely Yours,
Sakib Zaman- 1420203

2|Page
 Executive Summary
This report is aimed at defining and stating about the motor insurance and its benefits, its
disadvantages and the importance of motor insurance in Bangladesh.

The report starts off with the details about the motor insurance and with different types of motor
insurance which are offered in Bangladesh and in different countries. And since motor insurance is
mandatory by the law in almost all countries, so the importance of motor insurance is increasing day by
day. Besides here in this report, based in coverage, motor insurance policy has been classified into
different categories- which will help us to enhance knowledge about different types of motor insurance
policies. Here in this report, I have given most importance on motor insurance on Bangladesh and
different types of motor insurance that are being offered here. Though first party motor insurance is
more beneficial than third party, nevertheless people here are attracted more to third party insurance
because of less premium. This all has been discussed here with showing logics. Though motor insurance
has lots of benefits, it has some disadvantages as well which have been discussed here in this report.
Overall this report reveals specific information about the motor insurance and the impact of it in
Bangladesh and this report has been prepared after gathering various information from different
websites and after doing proper analysis.

3|Page
Table of Contents

Insurance:.................................................................................................................................................. 5
Motor Insurance: ...................................................................................................................................... 5
Motor Insurance Coverage: ...................................................................................................................... 6
Motor insurance in Bangladesh: ............................................................................................................... 7
Disadvantages of Motor Insurance: .......................................................................................................... 9
Conclusion: .............................................................................................................................................. 10
References: ............................................................................................................................................. 11

4|Page
Insurance:
Insurance is a contract, represented by a policy, in which an individual or entity receives financial
protection or reimbursement against losses from an insurance company. The company pools clients'
risks to make payments more affordable for the insured. Insurance policies are used to hedge against
the risk of financial losses, both big and small, that may result from damage to the insured or her
property, or from liability for damage or injury caused to a third party. The most common types of
personal insurance policies are auto, health, homeowners and life insurance policies.

Motor Insurance:
Vehicle insurance (also known as car insurance, motor insurance or auto insurance) is insurance for cars,
trucks, motorcycles, and other road vehicles. Its primary use is to provide financial protection against
physical damage or bodily injury resulting from traffic collisions and against liability that could also arise
there from. Vehicle insurance covers the insurer from the risk of loss from theft, loss from accidents or
any subsequent liabilities as well. Most auto policies are for six months to a year. Your insurance
company should notify you by mail when its time to renew the policy and to pay your premium. To
insurance protects you against financial loss if you have an accident. It is a contract between you and the
insurance company. You agree to pay the premium and the insurance company agrees to pay your
losses as defined in your policy. Motor insurance is also mandatory by the law. It is a legal requirement
in Bangladesh to have insured a minimal level of insurance protection before driving any motor vehicle.

The word Motor broadly covers a lot of classes of vehicles plying on the roads. These may be two-
wheelers like scooters and motorbikes, three-wheelers or four wheelers like private cars, jeeps, buses,
trucks, commercial taxis and other vehicles. Three types of motor insurance is offered in Bangladesh and
neighborhood countries.

Car Insurance: Majority of the elite group of people or those who

earn well own a car. So the demand of private car insurance is
growing day by day in Bangladesh and other countries as well. When
you own a car, motor insurance becomes mandatory for the
vehicles that you own, no matter whether its a brand new or
second hand car. This is why its said that car insurance
is the fastest growing segment in the insurance sector as car
insurance is mandatory while buying a car. In most of the cases, its
seen that recognized car manufacturer tries up with leading
insurance companies to provide insurance to the customers as fast as possible. Car insurance is
important since it covers loss or damage by accident, fire, lightning, riots, earth quake, hurricane,
terrorist attacks, explosion, theft, third partys claims and damages (like liability for third party injury
or death, third party property and liability to paid driver). car insurance can be done very simply just
by communicating directly with the insurance company or insurance broker house. On payment of
appropriate additional premium it covers loss or damage to electrical or electronic accessories and
other significant items. Mostly car owners in Bangladesh do third party insurance for their vehicles
which is less costly. 3rd Party Car insurance in Bangladesh is a common phenomenon. Insurance

5|Page
 policy is an evidence of agreement between two parties- the 1st party is Insurance Company and the
2nd party is vehicle driver. 3rd party is not engaged in the agreement concerning the driver and the
insurance provider.

Two Wheelers Insurance: Two wheeler insurance is another type of

popular auto insurance. This insurance provides protection against
natural and human made calamities like: fire, rockslide, landslide, storm,
hurricane, flood, earthquake, burglary, theft, riots or any damage caused
to the vehicle in transit by road, air, inland waterway or rail. This
accident cover can also be opted for passengers. It ensures the owner
of the insured vehicle is free from any third-party liability that may
arise in the case of an accident where the insured vehicle is involved in
the accident. Besides by renewing your two-wheeler insurance policy on time ensures that you can
avail discounts, such as No Claim Bonus (NCB). By not renewing your policy on time, you can lose
these perks and discounts. Security and peace of mind are the most important feature that are
offered by insurance company on renewing the two-wheeler insurance policy.

Commercial Vehicle Insurance: This type of insurance covers all those

vehicles which are not used for personal purpose. Trucks, buses,
heavy commercial vehicles, light commercial vehicles, multi utility
vehicles, agricultural vehicles, ambulances etc are covered under
this insurance. The premium is calculated on the basis of the make
and model of the commercial vehicle, place of registration, year of
manufacture, current showroom price and whether the insurer is
individual or corporate. There are different insurance companies that
provide commercial vehicle insurance for the vehicles that are being used for
commercial purposes. In countries like Bangladesh, where the rate of accident is so high, It is very
important for businesses to have commercial auto insurance. This is especially true for those
companies that utilize trucks, vans and cars as the main source of income for their business. With
the vehicles always on the road, there may be instances where drivers can get into accidents with
other vehicles or in other occasions, the vehicle may be damaged due to extreme weather
conditions. With the right commercial insurance, you are sure to be protected from these
unforeseen circumstances. In some cases, the damages done to a commercial vehicle is not the fault
of the driver. This may happen when other drivers are not careful or when a tree branch hits the
vehicle. When this happens, having commercial insurance that covers the damages is very helpful.

Motor Insurance Coverage:

Based on coverage, motor insurance policies can be classified into the following types:

1. Third-Party insurance: This compensates only third-party injuries and their property damages. Its
the type of insurance that people opt for just because its mandatory. It protects a policy holder
against losses which arise due to bodily injury/death to a third party or any damage to property.

6|Page
 Here third party includes people travelling with you or whom the insured person injures and claims
damages at the time of accident. But this insurance does not protect you, your vehicle and co-
passengers against losses which arise due to bodily injury/death.

2. Collision Coverage: If there is a covered accident, collision coverage will pay for the repairs to
your car. If your car is totaled (where the cost to repair it exceeds the value of the vehicle) in an
accident, collision coverage will pay the value of your car. If your car is older, it may not be worth
carrying collision coverage on it, depending on the value. On the other hand, if you have a more
expensive car or one that is relatively new, collision insurance can help get you back to where you
were before any damage to your car.

3. Comprehensive Coverage: What if something happens to your car that is unrelated to a covered
accident - weather damage, you hit a deer, your car is stolen - will your insurance company cover
the loss? Liability insurance and collision coverage cover accidents, but not these situations. These
situations are covered by Comprehensive (other than Collision) coverage. This insurance covers
losses/damages to you and your vehicle as well as protects you against third-party liabilities. Its the
type of insurance that people opt for if they want financial protection from losses caused due to
accidents, theft and natural disasters.

4. Engine and Electronic Circuit Cover: This insurance covers expenses incurred when there is a
damage to the insured vehicles engine or electronic circuits.

5. Personal Injury Protection : Personal Injury Protection (PIP) covers your medical bills when you or
the passengers in your car get hurt in an accident. It's known as "No-Fault Insurance" because your
insurer pays out regardless of who is at fault. Since neither party has to prove fault or go to court as
part of the claims process, payments tend to be faster than with some other types of auto
insurance.

Motor insurance in Bangladesh:

Motor Car, two-wheelers are the common phenomenon and popular autos in Bangladesh for Private
use. Bangladeshi People use the numbers vehicle brand such as Toyota, Mitsubishi, Honda, Nissan,
Mazda and others, But most of Private car is Toyota and Honda brands. Besides Yamaha, Honda, Hero,
Suzuki brands motorcycle are most popular among the bikers of this country. When people buy any
asset like vehicle or Private car then he or she also
think about the financial protection of his vehicles or
assets. We know Insurance company gives any kind of
protection when you buy Insurance against your assets.
Motor Insurance is one of the most important and
necessary needs in Bangladesh for many reasons.
Insurance is very crucial how you possess your car
insurance so that you can defend yourself in the
occurrence of a car accident. We know the scenario of
the roads and Highway of our country. Besides,

7|Page
Bangladesh has a major crisis for political turmoil and social problem, We often see during strike- which
is called by political parties, a certain group often targets motor vehicles and burn them. Besides stealing
vehicles and parts, road accident are the major cause why a motor car should be insured. All these are
the causes why insurance is very important in Bangladesh for any kind of vehicle such as Car , Bus, Track
or other vehicles.

Car Insurance premium in Bangladesh is not fixed and it is fluctuated. Insurance Premium In Bangladesh
totally depends on many terms conditions criteria such
as the value of the vehicle, liability, vehicle CC, Model
year etc. Generally vehicle owners of Bangladesh are
very much used to with 1st Part Insurance and 3rd Party
insurance. In case of Auto Insurance , first party
coverage pays to repair your car when damaged in an
accident or replace it in case of loss by theft or fire.
Whereas Third party insurance covers any physical
damage to the life or property of any person caused by
the actions of the insured. But since the premium of
third party is comparatively much lesser than first party, so most of the people drive their vehicles in
Bangladesh with third party insurance. There are some first party insurance holders as well in
Bangladesh but the number is very low and most of their vehicles are so expensive and brand new. 3rd
party insurance in Bangladesh cannot be able to help any vehicle owner to get financial benefits when
his/her vehicle is theft by thief or any accidental destruction. In Bangladesh 3rd party car insurance only
help you to run your vehicle on the road and to show the paper when vehicle is checked by traffic police.
The premium of first and third party insurance are given below as an example.

3RD PARTY CAR INSURANCE PREMIUM FOR A 1500CC VEHICLE:

Vehicle Type: Car Saloon

Vehicle CC : 1500

Basic Premium : 250.00

4 Passenger : 180.00
Total : 430.00
Driver : 30.00
Net Premium : 460.00
Add. Vat @15% : 69.00
Total Premium : 529.00

1st PARTY CAR INSURANCE PREMIUM FOR A 1500CC VEHICLE :

Vehicle Cost:20,00,000.00
Vehicle CC: 1500

Basic Premium : 2,873.00

8|Page
 Add. 2.65% : 53,000.00
Own damage Premium : 55,873.00
Act. Liability : 460.00
Net Premium : 56,333.00
Add. Vat @15% : 8,450.00
Total Premium : 64,783.00

Besides there since its written before about the comprehensive policy and what this covers, theres
another policy called Act- liability policy which covers for Death Tk. 20,000, Grievous Injury Tk. 10,000,
Minor Injury Tk. 5,000 & Property Damage Tk. 50,000.

Theres another thing called No-Claim bonus. No-claim bonus (NCB) is a discount in premium offered by
insurance companies if a vehicle owner has not made a single claim during the term of the motor
insurance policy. The no-claim bonus is a reward to the vehicle owner for prudent use of the vehicle. For
example, if you sell a 10-year old hatchback and purchase a C-segment car, the no-claim bonus will pass
on to the new vehicle and you can save considerably on your insurance costs. It can be transferred to
another insurance company subject to evidence in the form of a renewal notice or letter, confirming the
NCB entitlement from the previous insurer. You can eligible 30% no claim bonus for 1st years in
Bangladesh and this discount can go as high as 50%.

Disadvantages of Motor Insurance:

Although we all are aware of the benefits of motor insurance, but besides all the benefits, it has some
disadvantages as well. Most of the people blindly get into Car insurance to get safety for their Cars, but
they dont see the Disadvantages of Car insurance. The biggest problem with Car Insurance is the
insurance company often cover certain parts of your damaged car. And you or your car Driver probably
dont know which part of your car is going to be damaged. So, its one of the disadvantages of Car
Insurance. Another problem is insurance is a burden, when you are done with insurance, it becomes a
burden for you. Paying every month (or partially) just to get your car on the road is really troublesome.
Another problem with many or almost all Car Insurance company is they often take times to release the
check and till then you cant do anything to get the payment early. And you have to wait till the money
reach to you. Besides, Many customer complain that the company wants you to pay for the repair first
and then you can claim to the insurance company. This is serious issue for the customers. Another
important thing to keep in mind when getting motor insurance in Bangladesh is- insurance companies
can and do dispute claims, so it's important to gather all the appropriate documentation of the accident.
Get a police report, take pictures, and do whatever it takes prove what happened on the road. Imagine
you are going to have to prove it in court because you just might. Submit all of this evidence along with
your claim, it can substantially speed up the process. Many of the people have no idea what and how
much their policy covers, which often results in nasty surprises when attempting to file a claim. Time
should be set aside when purchasing the policy to read and fully understand it. It may take a while, but
its worth it to avoid the later hassle.

9|Page
Auto repair insurance policies can help you save a lot of money on needed car repairs and the parts
needed for those repairs. However, you should carefully research different Car repair insurance
offerings and try to find a policy that maximizes coverage and is affordable. Also, you should make sure
that the policy covers repairs you feel are important and provides quick and fair handling claims.
Although we have Insurance Development & Regulatory Authority (IRDA) in Bangladesh which has been
formed under the provision on Insurance Development and Regulatory Authority Act 2010. This IRDA
regulates all the insurance companies in Bangladesh and also supervise and monitors their activities and
they have the right to suspend any insurance company if they are found doing fraudulent activities with
their clients.

Conclusion:
Motor insurance is one of the most important insurance for Bangladesh and as well as other countries
since its mandatory by the law. In developing countries like us, most of the chauffeur who drives the
motor car in the road are unaware about the traffic signals and different traffic rules and regulations. So
for any accident if they are not insured, they have to pay huge money for this. But if they are done with
insurance, it helps them to reduce the risk as much as possible and insurance company is liable to
compensate them. Premium has to be paid on time in order to get this benefits and this has to be
against own will. Despite of having some trouble, since its mandatory by law and it has good benefits,
so the importance of motor insurance is increasing day by day in Bangladesh and other countries as well.

10 | P a g e
References:
http://bdlaws.minlaw.gov.bd/pdf/654__IX_.pdf

http://www.dhakainsurancebd.com/Motor

https://insurancedoor.blogspot.com/2013/06/third-party-car-insurance-in-bangladesh.html

https://insurancedoor.blogspot.com/2016/03/car-insurance-in-bangladesh.html

http://www.phoenixinsurance.com.bd/services/motor-insurance/

http://woodsinsurance.com/the-importance-of-commercial-auto-insurance/

https://en.wikipedia.org/wiki/Vehicle_insurance

https://www.policybazaar.com/motor-insurance/car-insurance/articles/what-does-car-insurance-cover/

11 | P a g e