Chapter 3

MOTOR INSURANCE

The motor insurance portfolio, falls under the miscellaneous department of insurance
companies. It generates a major portion of total non-life business of companies operating in
India. It was a tariff business. With the nontariff regime introduced by IRDA now no tariff is
applicable, but now companies can give discount on tariff rates.

The motor tariff has been revised from time to time keeping in view apart from other factors,
the present market conditions, requirements of industry as a whole and insurance industry
in particular and motor claims ratio. The current tariff has been revised with effect from 1st
July 2002.

All the motor vehicles operating in India are the subject matter of insurance and for this
purpose they are classified into three categories with further sub divisions according to the
uses as under:

1. Private cars

2. Motor cycles and motor scooters

3. Commercial vehicles

Commercial vehicles have been further classified according to their uses as under

1. Goods carrying vehicles

o a) Light motor vehicles

o b) Medium motor vehicles

o c) Heavy motor vehicles

2. Passenger carrying vehicles

o a) Motorised rickshaws

o b) Taxis

o c) Buses

3. Miscellaneous vehicles

o a) Ambulances

o b) Cranes

o c) Agricultural tractors

o d) Prison vans etc.

There can only be two types of losses which could arise on the above mentioned vehicles
i.e.

1. Loss or damage to the vehicle &

2. Third party liability
Types of polices
For all classes of vehicles, there are two types of polices available under motor tariff i.e.

 Liability only policy

This policy covers third party liability for bodily injury and / or death and property damage.
Personal accident cover for owner driver has also been included in the new tariff. According
to the latest circular from IRDAI, for a new two wheeler, compulsorily liability only package
needs to be purchased for 5 years, and for 3 years in case of a four wheeler.
 Package policy
This policy covers own damage losses to the vehicles in addition to the liability only cover
as above.

 
Motor Vehicle Act
Motor vehicle act 1939 stipulates that no vehicle can run on road without liability only policy.
Limited compensation was provided towards bodily injury/death. The act was amended in
1988, which made the above liability unlimited.

For proper understanding, let it be known that insured is 1st party, insurance company is
2nd party & every-body else falls under 3rd party including the passengers of private or
commercial vehicles and also the employees and or workers.

The liability, in case of employees, is as per the Workman's Compensation Act, 1923 & on
payment of additional premium, it could be made wider. In such case the workmen has the
option to claim either under WC Act or through MACT.

Under the WC Act the liability for death of the worker following accident is minimum Rs.80,
000/- & maximum Rs.4, 57, 080/- & for permanent total disablement it is Rs.90, 000/- &
Rs.5, 48, 496/- respectively, where as it is unlimited under MACT.

As regards to the third party property damages, the statuary limit is Rs.6,000/- but under the
new tariff w.e.f.1st July 2002 the insured has the option of increased TPPD limit of Rs.1 lakh
for two wheelers & Rs.7.5 lakh for other vehicles.

The premium is in-built & if insured doesn't want the increased limit; discount (ranging from
Rs.50/- to Rs.300/- depending upon the type of vehicle.

Rating
 As explained earlier the motor vehicles are classified under three categories i.e. private
cars, motorcycles and scooters and commercial vehicles. These vehicles are insured under
two polices i.e. liability and or package polices.

For the purpose of rating there are four parameters for all the vehicles in case of package
policies (liability premium being fixed according to class of vehicle) these parameters are:

1. Insured declared value;

It is the current dealer's ex. show-room price less applicable depreciation as per schedule.

2. Cubic capacity (or passenger carrying capacity/gross vehicle weight);

As per registration certificate issued by the concerned RTO to determine the same

3. Age of the vehicle;

As per registration certificate (RC) & policy period.

4. Geographical zones;
Depending upon the office of registration (of the concerned vehicle), whole of India is
divided under two zones:

Private cars, Two wheelers & Commercial vehicles rateable under section 4, C.1 &
C.4*
Zone A: Ahmedabad, Hyderabad, Bangalore , Pune , Delhi , Mumbai , Kolkata, Chennai.
Zone B : Rest of India
Commercial vehicles
Zone A : Delhi, Mumbai, Kolkata, Chennai
Zone B : All state capitals
Zone C : Rest of India
Claims-Own damage

Own Damage: Losses to the vehicle may be either partial or total loss.

Partial loss: The insured will submit a detailed estimate of repairs from the workshop of his
choice along with claim form. The insurance company appoints an independent surveyor or
an in-house surveyor (if the loss is less than INR. 20,000), who would assess the loss and
submit his report. The company will process the report, settle the loss and make payments
on completion of formalities.
Total loss: Losses could be due to accident, fire or theft.
In case of accidents (including fire) where the vehicle is beyond the scope of economical
repairs or where the liability exceeds 75% of the IDV, the claims are settled on total loss
basis. The liability under such cases is the IDV of the vehicle. The insurance company
would take the possession of the damaged vehicle for sale through auction (after getting it
transferred in its name from the RTO concerned) & settle the claim, after completion of
usual formalities.

For theft cases, there are certain additional formalities than that of accidental cases. The
insured must lodge an F.I.R. and has to obtain untraced report from the police. Insured also
needs to write to RTO and police station that having taken the claim from the insurance
company, the vehicle should not be transferred without their permission & insurance
company may be informed if the vehicle is traced out later.

The new tariff has provided compulsory excess on all vehicles. This excess has to be
deducted before making the payment.

Third party claims

These claims are being dealt by advocates in the MACT. The tribunal awards the
compensation based on the facts of the case & the insurance company deposits the award
in the court. If the liability is not in dispute, these cases could be compromised in
conciliation or Lok-Adalat.

Civil court has no jurisdiction in motor third party claims and there is no time limit to file case
under the MACT (Motor Accident Claim Tribunal).

However, Sec.140 of the MV Act provides compensation to the victim under No-Fault
Liability, which is Rs.50,000/- for death & Rs.25, 000/- for if injury caused results into
Permanent Total Disablement. M.A.C.T however has to pass an order for compensation.
This award under no fault liability cannot be recovered but would be adjusted against the
final award.

Hit & Run Sec. 163 of MV Act provides if some vehicle hit some person resulting death then
Rs. 25000/- & in case of grievous injury Rs. 12500/- are payable under Solatium Fund.

Personal accident claim of owner driver

Claims under compulsory personal accident cover shall be applicable under both liability
only and package policies. The owner of insured vehicle holding an 'effective' driving license
is termed as owner-driver for the purposes of this section.

Cover is provided to the owner-driver whilst driving the vehicle including mounting into/
dismounting from or traveling in the insured vehicle as a co–driver.

The maximum liability under this cover is Rs.15 lakhs for two wheelers, four wheelers &
other vehicles.

Cover
100% of CSI for death,

100% of CSI for loss of two limbs or sight of both eyes, or one limb and sight of one eye.

50% of CSI for loss of one limb or sight of one eye

100% of CSI for permanent total disablement from injuries other than named above

DEPRECIATION FOR ARRIVING AT IDV

Upto 6 months 5%

6 months - 1 year 15%

1 year - 2 years 20%

2 years - 3 years 30%

3 years - 4 years 40%

4 years - 5 years 50%

> 5 years & obsolete On consent

SHORT PERIOD PREMIUM SCALE

Upto 1 month 20%

1 month - 2 months 30%

2 month - 3 months 40%

3 month - 4 months 50%

4 month - 5 months 60%

5 month - 6 months 70%

6 month - 7 months 80%

7 month - 8 months 90%

Exceeding 8 months 100%

DEP. FOR PARTIAL LOSS CLAIMS

Upto 6 months Nil

6 months - 1 year 5%

1 year - 2 years 10%

2 years - 3 years 15%

3 years - 4 years 25%

4 years - 5 years 35%

5 years - 10 years 40%

Exceeding 10 years 50%

Rubber/ nylon/ Plastic 50%

Fibre glass 30%

Glass Nil

# N C B - ALL VEHICLES 1st claim

1st claim free year 20%

2 claim free year 25%

3 claim free year 35%

4 claim free year 45%

5 claim free year 50%

COMPULSORY EXCESS

2 wheelers Rs.50

Pvt car/ Taxi/ 3w < 1500cc Rs.500

Pvt car/ Taxi/ 3W > 1500cc Rs.1000

GCV PCV Excess

< 7500 KG< 17 PASS Rs. 500

7500-16500 17 - 36 PASS Rs. 1000

>16500 KG > 36
>16500 KG Rs. 1500
PASS

COMPULSORY PA FOR OWNER DRIVER

VEHICLE CSI PREMIUM

 2 wheeler 1 lakh Rs. 50

Pvt cars 2 lakh Rs. 100

Comm. 2 lakh Rs. 100

N/A in case of Firm / Company or if No licence

TP PD COVER (IN-BUILT)

2 wheeler 1 lakh

All others 7.5 lakhs

RESTRICTED TP PD COVER (DISC.)

2 wheeler Discount Rs. 50

Pvt car Discount Rs. 100

3 wheeler/ taxi Discount Rs. 150

Commercial Discount Rs. 200

RESTRICTIVE COVER FOR FIRE & OR THEFT

Act + fire only Act only + 25 % of OD

Act + theft only Act only + 30 % of OD

Act + fire + theft Act only + 50 % of OD

# Valid for 90 days-general & 365 days-military persons

GEOGRAPHICAL ZONE

PRIVATE CARS , TWO WHEELERS & COMMERCIAL VEHICLES RATEABLE

UNDER SEC 4.C.1 AND C.4

AHMEDABAD, HYDERABAD, BANGALORE, PUNE, DELHI,

ZONE A
MUMBAI, KOLKATA, CHENNAI
 ZONE B REST OF INDIA

COMMERCIAL VEHICLES EXCLUDING RATEABLE UNDER SEC 4.C.1 AND C.4

ZONE A DELHI, MUMBAI, KOLKATA, CHENNAI

ZONE B ALL STATE CAPITALS

ZONE C REST OF INDIA

DISCOUNTS

25% ON VINTAGE CARS, 33 1/3% ON VEH. CONFINED TO OWN PREMISES/ SITE

ON O/D PREMIUM.

50 % ON O/D PREMIUM FOR BLIND, HANDICAPPED, MENTALLY CHALLENGED

VEHICLE.

2.5% MAX RS.500 ON O/D PREMIUM FOR ANTI THEFT DEVICE APPROVED BY
ARAI

AAUI 5% MAX. RS.50 IN 2 WHEELER RS.200 IN CAR ON OWN DAMAGE PREMIUM

EXTRAS/ ADD-ON COVERS

FIBRE GLASS FUEL TANK RS100 FOR COMM.VEH. & RS 50 FOR OTHERS
VEHICLES ON O/D PREMIUM.

PA COVER RS.50 FOR PRIVATE CAR, RS.60 FOR COMMERCIAL VEHICLE & RS.70
FOR PILLION RIDER.

LPG/ CNG EXTRA FITTED @ 4% ON O/D PREMIUM & RS.60 FOR LIABILITY ONLY
PREMIUM.

ELECTRICAL/ ELECTRONIC FITTINGS OTHER THAN IN-BUILT @ 4 % ON O/D

PREMIUM

60% ON O/D PREMIUM FOR DRIVING SCHOOL VEHICLES RECOGNISED BY RTO.

Claim procedure
1.       Intimation of claim
 1.1. What Does policy speak on claim intimation?
The Policy condition mentions that “Notice shall be given in writing to the Company
immediately upon the occurrence of any accidental loss or damage in the event of
any claim”
1.2. Why A claim need to be intimated to the insurance company immediately?
From Insurer to insurer the time-period to report varies.  Most of the policy providers have a
window of 24 hours to 48 hours from the time of the accident to file a claim. Hence It's
always better to call up the insurer immediately and intimate the accidental event.

Mainly The early intimation will support the surveyor and insurer to authenticate the facts of
the accident.

1.3. Exceptions
At the same time if we refer IRDAI Circular : Ref. No: IRDA/NL/CIR/MISC/149/06/2017 A
delayed claim will be paid where the delay is proven to be for reasons beyond the control of
the policyholder. For Instance The insured policy holder himself has sustained injuries and
hospitalized due to the impact of the accident.

Tip : Even before taking the vehicle to the garage, intimating the Renewbuy helps. This will
help in some support like towing, pick-up, cashless garages etc, if it is offered by the
insurer.
2.       Appointment of surveyor
2.1. Let’s understand who is surveyor First
A surveyor is professionally competent person / Entity for assessing the loss/damage
suffered without any bias or prejudice and by a professional/expert in the field.

2.2. Regulations Governing Surveyor Operating Procedures

Regulation 12 of the IRDAI (Insurance Surveyors and Loss Accessors) Regulations, 2015
mandates appointment of Surveyors and Loss Assessors either by Insurance or Insurer to
assess loss under a policy of Insurance in respect of

(a) Motor Insurance – above Rs. 50,000/-

(b) other than Motor Insurance above Rs. 1,00,000/-.

2.3. Qualifications to become a surveyor

Further the required qualification to become surveyor has also laid down in Annexure-I of
schedule I of Regulation 12 of the IRDAI (Insurance Surveyors and Loss Accessors)
Regulations, 2015. A surveyor & Loss Assessor shall assess losses of only those
departments which are specified in his/her license.
2.4. Appointment of a surveyor when a claim is reported
IRDA stipulates the time limit for appointment of surveyors, which is 72 hours from date of
intimation of claim to insurers
 3. Assessment of loss & Survey Report
  The Loss Assessment varies from the type of claims we face
1. Collision :
2. Partial Theft & Total Theft
After vehicle meets with a collision damage and assessment done in two modes

1. spot/preliminary survey

2. final survey.

3.1. The duties of the Assessor / Surveyor will be as follows

 Take photographs, assess estimate and inform assessed estimates to the customer &
Insurer.
 After the completion of the Repairs, carry out re-inspection.
 The insured then makes payment to the workshop/ garage as per assessed
 Lastly, the insured submits the original bill, proof of Payment and cash receipt (derived from
the garage) to Accessor / surveyor
 Survey report is prepared and sent to the insurer for settlement along with all the
documents.
3.2. Duty & Responsibility of the customer / Policy Holder
IRDA also casts responsibility on the policyholder to co-operate with the surveyor and
provide him with all the information/ documents to enable him to assess the loss.

3.2.1.        Documents required for the claim

 Claim form duly signed by the insured with the stamp
 Copy of the insurance certificate.
 Copy of the RC book.
 Estimate of the damages from the repairer.
 DL of the person driving the vehicle at the time of the accident.
 FIR report if any
 Spot survey repot if any
 Fitness/permit/load challan if required
Delay, if any, in the submission of the report by the surveyor should be communicated to
the insurer and insured.

In case of Theft

An Investigator is appointed to verify the facts.

4.      Discharge voucher
4.1. What Is a Discharge Voucher?
A Discharge Voucher gives the reimbursing party a full and final discharge of the claimant’s
claim. A discharge voucher or settlement intimation voucher is a signed form the insurer
takes from the insured. Such a voucher is taken at the time of claim settlement. The form
states the amount that will be payable to the customer and he/she has to acknowledge the
amount by signing the form. If this form is not taken by the insurer, though the claim would
be paid, it would remain open in the books of the insurer.

In other words, a suitably worded Discharge Voucher would have the effect of barring /
preventing the same claimant to return at a later date to claim on the same matter.

4.2. Execution of discharge voucher

General Insurance companies always insist on a receipt from the insured; Hence The
insurers ensure that a Full satisfaction note / Discharge voucher is collected towards
settlement of claim. At the time of settling claims, policyholders have to sign the voucher. In
many cases, insurance companies refuse to pay a claim if policyholders do not sign the
voucher.

4.3. IRDAI’s clarification On Discharge Voucher

Policy Holder if they are not happy with the claim amount can pursue the case even if
discharge voucher has been signed.

If customers feel something is wrong or if they are not satisfied with the claim amount, they
can raise a complaint even if they have signed the voucher. In most cases, once customers
sign the discharge voucher, they don’t come back for additional claims. But that has to be
done within three years of settling the claim. After three years, the policyholder cannot ask
for additional claims because “DULY SIGNED RECEIPT IS NOT SURRENDER OF
RIGHTS”
 5. Claim Payment
 The claims payment varies in two ways;
 5.1. Cashless Claims
 Payments that need to be borne by Insurer will be made directly to the garage on
completion of the repairs. The Liability Order / DO will specify the balance amount that has
to be paid by policy holder as per policy terms and conditions.

If the vehicle is under hypothecation then NOC from Financier is mandatory; If

hypothecation is closed the closure letter.

5.2. Reimbursement Claim
After perusal of all bills and documents the Insurer directly pays the indemnity claim amount
to the customers Bank Account directly. Please note that insurer will only initiate NEFT
transfers to the Insured.