Guide for Motor Insurance - IC 72

Key for Associateship Examination

Guide for
Motor Insurance
(Paper No. IC-72)

Authored by:
Dr. Rakesh Agarwal
M.Com(BIM),L.L.B, PGJMC, M.B.A, F.C.A., DISA, F.I.I.I, Ph.D
Editor
The Insurance Times

Published By :
The Insurance Times
The First monthly Journal on Insurance in India in service
since 1981

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G
© Dr Rakesh Agarwal
1st Edition October 2012
2nd Edition December 2015
3rd Edition June 2016
4th Edition January 2017
5th Reprint Edition May 2017
6th Edition September 2017

ISBN : 978-93-81489-05-5
Cost : ` 1500 - Self Learning Kit
(Includes MCQ Guide, Ebook, and Online Mock Test)
All Rights reserved by the publishers. No part of this
publication can be published or reproduced in any form, by
shuffling of questions, remodelling of questions or by any
means i.e., electronic, mechanical, including photocopying
without the prior permission of the publishers.

Every effort has been made to avoid errors or omissions in

this publication. This is a guide book prepared on the basis
of syllabus of Insurance Institute of India for Associate Exam
to assist candidates to pass in exam successfully.

The publishers will not be responsible for loss or damage due

to errors in this publication. Any error, mistake may be brought
to our notice, which shall be taken care in the next edition.
All disputes subject to Kolkata Jurisdiction.

WARNING: Do not Xerox the book. The Book may

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 Guide for Motor Insurance - IC 72

Preface

We are happy to launch the 6th Edition of Guide for

Motor Insurance Insurance (IC-72).

Recently III has revised the syllabus and now all the
papers will be in Multiple Choice format.

W e have covered thoroughly the whole syllabus

prescribed by I.I.I and the questions and answers are
given based on each chapter. The book has been
prepared carefully to cover almost all types of questions
that can be asked in exam.

We hope the candidates will find this book very useful

in preparing for the examination. Please do go through
the tips given in this book for clearing the exam
successfully.

We are thankful to Shyam Agarwal, Associate Editor, The

Insurance Times and Dr Abhijeet Chattoraj, Resident
Editor, The Insurance Times for valuable inputs in the
book and for his untiring effort in preparation of the
guide.

Though we have tried to make this publication error

free, if you come across any error please email/fax us
so that we can correct the same in next edition.

We wish you best of luck for the examination.

- Editor in Chief,
R. G. Agarwala
The Insurance Times

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Tips for passing the exam successfully

1. Plan out your study programme in advance so

that you do not leave any important topic.

2. We have covered questions in various pattern

and options so that the concept of subject is
clear to the candidates. Since the questions may
be twisted in the exam it is not advisable to
mug up the questions.

3. Before appearing in the examination try to solve

questions in exam conditions by setting up time
and solving the questions as if appearing in exam.

4. Do not consult too many things at a time

otherwise you will confuse everything. Go step
by step.

5. When you view the question paper in the exam

do not try to read all questions instantly as it will
waste your time and if you don't know answers
of some question you will get tensed.

6. Read and read carefully before answering any

question as the question might have been
twisted.

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 Guide for Motor Insurance - IC 72

7. Before deciding the answer give stress on the

logic and you will get the correct answer.

8. Always keep some time to review the paper.

9. Once you complete reading a chapter in book,

attempt for online mock test. If you do not score
well again go to the chapter and study again
and reattempt the questions until you get good
marks.

10. In the new pattern of questions the questions

are large so before answering read questions
very carefully. A single not or negative or positive
construction may change the answer, so check
whether question is asking in affirmative or
negative.

11. When you receive the question paper first

answer the questions in which you are confident.
Say you know 40 out of 100 question then
answer them so that you are confident of
securing this mark. After this you again start
from beginning and read question twice/thrice if
you have confusion.

12. As more and more exams are being conducted

in MCQ pattern the level of difficulty is

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increasing. A new trend has started where you

may find that most answers are right. Out of
this you will have to select the best option which
best resembles the question.

13. Adopt Elimination technique. For example out of

5 option first try to figure out the option which
is absolutely wrong. So go on eliminating the
wrong options to arrive at the correct option.

14. Don't leave any question unanswered. Since

there is no negative marking attempt all the
questions. Try to arrive at the most likely
answer.

15. In many questions you will find the answer All

above. Most likely in such type of questions the
answer will be All the above. But again exercise
caution become they may intentionally give this
option to confuse you.

16. Do not leave any chapter. Focus on all chapters

equally. MCQ questions are set from a pool of
questions. At times it happens that from a
particular chapter many questions are set. You
leave any chapter at your sole risk.

17. Along with this guide study the Ebook given

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 Guide for Motor Insurance - IC 72

along with this book including the Online Mock

Test for assessing your preparation.

18. Relax, relax and relax while answering. Avoid

anxiety. If you will take strain then chances are
that you may answer incorrectly even the
questions you know.

19. Well we wish you Best of Luck for the exam

and hope you clear the paper in the coming
attempt.

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Contents

Motor Insurance Highlights 11

MCQ Questions & Answers

Chapter -1
Introduction to Motor Insurance 94
Chapter -2
Marketing in Motor Insurance 131
Chapter -3
Type of Motor Vehicles, Documents
and Policies 158
Chapter -4
Underwriting in Motor Insurance 196
Chapter -5
Motor Insurance Claims 239
Chapter -6
IT applications in Motor Insurance 269
Chapter -7
Consumer Delight 287

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 Guide for Motor Insurance - IC 72

Chapter -8
Third party liability insurance 304
Chapter -9
Procedures for Filing and Defending 343
Chapter -10
Quantum Fixation 364
Chapter -11
Fraud Management and
Internal Audit 387

Answers for all Chapters 413

Motor Insurance Recap Questions 429

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 Guide for Motor Insurance - IC 72

Motor Insurance
Highlights

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Important Points to Remember

How third party insurance was made

compulsory in India?

Ans. Motor insurance, a fascinating branch of

insurance, had its beginnings in the United Kingdom
in the early part of the last century. The first motor
car was introduced into England in 1894.

The first motor policy was introduced in 1895 to cover

third party liabilities. By 1899, accidental damage to the
car was added to the policy, thus introducing, the
comprehensive policy along the lines of the policy issued
today.

In 1903, the Car and General Insurance Corporation

Ltd. was established mainly to transact motor
insurance, followed by other companies. After World
War-I, there was considerable increase in the
number of vehicles on the road as also in the number
of road accidents. Many injured persons in road
accidents were unable to recover damages because
not all motorists were insured.

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 Guide for Motor Insurance - IC 72

This led to the introduction of compulsory third party

insurance through the passing of the Road Traffic
Acts 1930 and 1934. The compulsory insurance
provisions of these Acts have been consolidated by
the Road Traffic Act, 1960.

In India, the Motor Vehicle Act was passed in 1939

introducing the law relating to compulsory third party
insurance. The practice of motor insurance in India
generally follows that of the U.K. market. The
business was governed by a tariff till 2006, and now
like the UK market it is non-tariff.

However, the IRDA, the Indian regulatory authority for

insurance has directed insurers in India to continue
to follow the tariff policy wordings. The Motor
Vehicles Act 1988 (Act No. 59 of 1988) has replaced
the earlier 1939 Act, and it became effective from 1st
July 1989. The third party insurance business is still
governed by the India Motor Tariff.

Legally, no motor vehicle is allowed to be driven on

the road in India without valid insurance. Hence, it is
obligatory to get the vehicle insured. As per the Motor
Vehicles Act, 1988 it is mandatory for every owner
of a vehicle plying on public roads, to take an
insurance policy, to cover the amount, which the
owner becomes legally liable to pay as damages to
third parties as a result of accidental death, bodily

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Chapter 1

Introduction to Motor Insurance

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Model Questions Bank - Set I

1. The motor insurance came into existence

in the early part of the last century from
which country?
a. Canada b. UK
c. USA d. Australia
e. Europe

2. The first motor car was introduced in

England in which year?
a. 1895 b. 1894
c. 1899 d. 1903
e. 1939

3. Accident damage was added to the car

policy leading to the formation of
________?
a. Liability policy
b. Third-party policy
c. Comprehensive policy
d. Personal policy
e. Motor vehicle policy

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4. The car and general insurance

Corporation Ltd was established in_____
to transact motor insurance followed by
other companies.
a. 1894 b. 1895
c. 1899 d. 1903
e. 1904

5. The passage of Road Traffic Act 1930 and

1934 led to the introduction of which form
of insurance?
a. The motor vehicle policy
b. Public liability policy
c. Comprehensive policy
d. Compulsory third-party
e. None of the above

6. In which year was the motor vehicles act

passed in India?
a. 1934 b. 1935
c. 1936 d. 1937
e. 1939

7. The principles of motor insurance contracts

are similar to which form of insurance?
a. Property and liability insurance
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Answers - SET I 38. c) on the basis of.....

39. b) 2
1. a. 1988
40. c) Form 52 in terms of....
2. e. Both a and b.
41. b) Form 51 in terms of....
3. d. Statement a is correct
42. a) Hire purchase
4. e. Only a,b,c
43. e) only a b c
5. a. Sec 157
44. a) the insurer can retain...
6. c. 12 months
45. b) 750000
7. b. Cars manufactured ....
46. a) True
8. b. Insured declared value
47. c) 1st July 2002 to.....
9. c. Rs 25
48. a) True
10. b. Endorsement IMT 6
49. c) 1st July 1946
11. c. 7 days
50. b) FORM 51 in terms of...
12. d. Rs 50
51. b) 5yrs
13. c. 1st july 2002 to 30th ...
52. a) True
14. e. Myanmar
53. c) All of the above
15. b. 30 and 1/3%
54. a) True
16. b. 30%
55. b) Rs. 27/- will be....
17. d. 15000
56. c) Rs. 25000 and 12500
18. e. All the above
57. c) IMT 23
19 a. IMT 46
58. c) Both are True
20. a. at 1.5% on IDV
59. b) 30% on the OD.....
21. a. Invoice Value
60. c) 6770
22. b. Rs 7.5 lacs or .......
61. b) Rs. 500/-
23. d. 60 days
62. c) Both of the above
24 d. Vintage cars
63. a) True
25. d. All the above
64. d) 100/-
26. a) 3
65. b) False
27. c) MV Act 1994 as.....
66. a) FIR
28. b) 25000
67. b) MACT
29. a) giving exclusive.....
68. d) All of the above
30. a) automatic transfer of....
69. c) RC book and Keys
31. c) Insured's declared.....
70. a) True
32. b) owner himself is the....
71. b) False
33. b) the injury caused by....
72. d) Three wheeler
34. c) 10
73. b) False
35. c) when the repairing.....
74. c. repair liability has....
36. b) Maldives
75. d. A1I the above
37. b) cars manufactured.....

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 Guide for Motor Insurance - IC 72
Answers - SET II 38. b. 25%
39. d. all the above
1. b. 10% of the offer....
40. b. Rs.27/-
2. d. CMD/HO salvage.....
41. d. all the above
3. b. 14.11.1994
42. c. towed and trailer.....
4. b. 6 months and 3 years
43. a. at 1.5% on IDV
5. a. 16 years
44. b. will not be applicable...
6. b. section 166
45. c. policies covering use...
7. d. anyone of the above....
46. c. dead bodies
8. b. ten
47. d. all the above
9. c. the current package....
48. a. 1% of the basic OD....
10. d. all the above
49. b. manufacturer/dealer
11. d. all the above
50. c. provided the chassis....
12. a. Accident register.....
13. b. non-standard claim Answers - SET III
14. c. standard claim since.... 1. b. 1.0% on such....
15. c. Driving licence with.... 2. b. both in registered.....
16. b. tenable as...... 3. b. standard private car....
17. b) Vintage cars 4. a. Rs.12/- per car per....
18. b. Commercial vehicle..... 5. a. Rs.6 and 1 per....
19. c. Valid until expiry of..... 6. a. Rs.15 and 8 for.....
20. c. 65% 7. b. 50% of rates.....
21. b. not covered 8. b. 50%
22. c. Motor Trade policies 9. b. motor trade - internal....
23. c. result in injury within... 10. b. 1988 and 1994
24. c. For Liability portion of... 11. b. protecting the loss.....
25. c. It is permissible to...... 12. c. certificate of.....
26. c. Rs.20,000/- 13. b. 90 and 60 days
27. d. 1468, 1598 and 4931 14. c. section 149(2)
28. c. 15000 15. b. 30%
29. d. 5000 16. b. RC book in original
30. c. 300% on both the..... 17. a. award deposit receipt
31. d. Afghanistan 18. b. section 157 of MV Act
32. c. 2500 19. c. payment of.......
33. c. 1923 20. c. under either of the.....
34. c. 1855 21. a. Rs.10,000/-
35. c. four categories 22. a. Section 146
36. b. 20% 23. b. Rs.25,000/-
37. a. insured's premises 24. c. in more than one.....

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