MOTOR INSURANCE

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 IMPORTANCE OF MOTOR
INSURANCE

Maya left office at 4.00 pm on a Friday

evening. As she entered the highway she
looked at the watch and realised that she
had only 10 minutes to pick her daughter
from the school. She looked at the car in
front and accelerated to overtake the car…
and then…

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Who all do you think got affected
because of this accident?

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Motor Insurance –
Scope of Cover

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 Motor insurance - Legislation
 Motor Vehicle Insurance - governed by the
Motor Vehicle Act,1939 & amended in 1988.
It is also regulated by the Indian Motor Tariff

 Act requires any motor vehicle plying in a

public place to be compulsorily insured against
third party injury and property damage

 The Indian Motor Tariff consists of 8 Sections

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GENERAL REGULATIONS

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 Insurance not provided for:

Motor Insurance includes Private Cars,

Motorized Two Wheelers and Commercial
Vehicles excluding vehicles running on rails.

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 Proposal Form:

Is required to be submitted by the insured to

the insurer before the commencement of
cover

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 Types of Policies

 (i) Liability Only Policy: Covers Third Party

Liability for bodily injury and/ or death and
Property Damage .Personal Accident Cover
for Owner-Driver is also included.

 (ii) Package Policy: Covers loss or damage

to the vehicle insured in addition to (i) above.

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 Rating
Loading on tariff premium rates by 100% may
be applied for adverse claims experience

If the experience continues to be adverse, a

further loading of 100% on the expiring
premium may be applied.

No further loading shall apply.

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 Extension of Geographical Area
By charging a flat additional premium the
Geographical Area of Motor Policies may be
extended to include;

 Bangladesh
 Bhutan
 Nepal
 Pakistan
 Sri Lanka
 Maldives

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 Check your understanding

 A customer who is traveling to Bhutan meets

with an accident.
Is the claim payable?

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 The claim will be payable only if the customer
has opted for extension of geographical
coverage.

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 Vintage Cars & Classic Cars
 Vintage Cars
Any car manufactured prior to 31-12-1940 and
duly certified by the Vintage and Classic Car
Club of India
 Classic Cars
Any car manufactured after 31-12-1940, but
before 31-12-1970, is considered as a Classic
Car by the Vintage and Classic Car Club of
India.
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 Insured’s Declared Value (IDV)

IDV of the vehicle is the ‘SUM INSURED’

IDV will be fixed at the commencement of

each policy period for each insured vehicle

IDV : fixed on the basis of manufacturer’s

listed selling price of the model and adjusted
for depreciation
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 SCHEDULE OF DEPRECIATION FOR
ARRIVING AT IDV
AGE OF THE VEHICLE % OF DEPRECIATION
FOR FIXING IDV
Not exceeding 6 months 5%
Exceeding 1 year but not 20%
exceeding 2 years
Exceeding 2 years but not 30%
exceeding 3 years
Exceeding 3 years but not 40%
exceeding 4 years
Exceeding 4 years but not 50%
exceeding 5 years
IDV for vehicle above 5 years & obsolete models will be mutually agreed
upon by the company and insured as per market value 18
 Check your understanding

 Vehicle : Honda City GXI

 Year of Mnfg : 2007
 Showroom Price : 7 Lacs

What is the IDV?

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 Depreciation on parts in case of partial loss
claims

 A certain percentage
is charged on parts in
case of partial loss
whatever maybe the
class of the vehicle
depending on parts
and age of the
vehicle.

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 Geographical Zones
 Private Cars/ Motorized Two Wheelers /
Commercial Vehicles rateable under Section
4.C.1 and C.4.

 Zone A: Ahmedabad, Bangalore, Chennai,

Hyderabad , Kolkata, Mumbai, New Delhi and
Pune.

 Zone B: Rest of India

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 Commercial Vehicles excluding vehicles
rateable under Section 4. C.1 and C.4.

 Zone A Chennai, Delhi / New Delhi, Kolkata,

Mumbai
 Zone B All other State Capitals
 Zone C Rest of India

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 Period of Insurance
 Normally 12 months, Unless specifically stated
otherwise

 Premium Rates for Short Period Cover

 Short Period Cover/ Renewal may be granted

for periods less than twelve months at the short
period scale as per AIMT

 Short period for Liability Only Policies are not

permissible.
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 Display of Premium
 In case of a Package Policy, the Own Damage and the
Liability components of premium should be displayed
separately in the Policy Schedule

 All permissible loadings on /discounts from tariff rates

should be displayed separately in the policy schedule

 The Own Damage as well as the Liability components of

premium are required to be rounded off to the nearest
rupee, separately.

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 Compulsory Deductibles

 Claims under Own Damage section of policies

covering all classes of vehicles are subject to a
compulsory deductible as per the table below:

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 Voluntary Excess
 Insured may opt for higher deductible over and above
the compulsory deductible which attracts discount in
OD premium

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 NO CLAIM BONUS (NCB)
 NCB is to reward safe driving
 This is given at the time of renewal by way of
discount
 NCB is given only on Own Damage Premium
 An insured becomes entitled to NCB only at
the renewal of a policy after the expiry of the
full duration of 12months.

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 The entitlement of NCB shall follow the
fortune of the original insured and not the
vehicle or the policy.
i.e., NCB is provided to the insured and not the
vehicle

 In the event of the death of the insured, the

NCB entitlement will pass on to family
members (spouse and/or children).

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 The percentage of NCB earned on a vehicle
owned by an institution during the period
when it was allotted to and exclusively
operated by an employee should be passed on
to the employee if the ownership of the
vehicle is transferred in the name of the
employee (on submission of a letter from the
employer)

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 In the event of the insured, transferring his
insurance from one insurer to another insurer,
the transferee insurer may allow the same
rate of NCB which the insured would have
received from the previous insurer

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 In case an insured holds NCB but fails to renew his
policy on time, the NCB will be transferred to his
policy if the policy is renewed within 3 months of
expiry.
i.e., NCB cannot be allowed when a policy is not
renewed within 90 days of its expiry.

 If an insured vehicle is sold, and if the insured holds

NCB, he/she can obtain NCB certificate from the
insurance company for the same. This is valid for 3
years

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 On production of evidence of having earned
NCB abroad, an insured may be granted NCB
on a new policy taken out in India as per
entitlement earned abroad, provided the policy
is taken out in India within three years of
expiry of the overseas insurance policy,
subject to relevant provisions of NCB under
these rules

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 Other Discounts:
 Automobile Association Membership
Private Car - 5% on Own Damage premium or max Rs. 200
Two Wheeler – 5% on OD premium or max Rs. 50
 􀂃Anti theft devices approved by ARAI
Private Car - 2.5% on Own Damage premium or max Rs. 500
Two Wheelers - 2.5% on Own Damage premium or max Rs.
500
 􀂃Vintage Car
25% on Own Damage Premium

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 Transfer of Ownership of vehicle
 On transfer of ownership, the Liability Only cover, either
under a Liability Only policy or under a Package Policy, is
deemed to have been transferred to the new owner with
effect from the date of transfer

 The TP cover will be valid for 3 months

 The OD cover will be valid for a period of 14 days from the

date the vehicle is transferred. Within this time, the new
owner should intimate the Insurer that the vehicle is
transferred, failing which the cover lapses

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 Change of Vehicle
 A vehicle insured under a policy can be substituted
by another vehicle of the same class for the balance
period of the policy subject to adjustment of
premium, if any, on pro-rata basis from the date of
substitution.

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 Cover note
 A cover note is a temporary certificate of insurance
issued by the Insurer before the issuance of a policy,
after the Insured has given a duly filled proposal form
and has paid the premium in full.
 A cover note is valid for a period of 60 days from the
date of issue of the cover note and the Insurer shall
issue the Certificate of Insurance before the cover
note expires.

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 Endorsements
 An endorsement is a written evidence of an agreed change to a
policy
 It is a document that incorporates changes in the terms of the
policy
 If there are any alterations to be done in the policy, the customer
needs to approach the Insurance company to effect the change
in the policy. This is done by way of an endorsement

 An endorsement may be issued at the time of issuing the policy

to provide additional benefits and cover or to impose restrictions
 An endorsement may also be issued subsequently to record
changes like change of address, change of name, change of
vehicle etc.

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 Cancellation of Motor Policy
 A policy can be cancelled only after ensuring
that the vehicle is insured elsewhere, at least
for Liability Only cover and after surrender of
the original Certificate of Insurance for
cancellation.

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