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EVOLUTION AND CONCEPTUAL FRAMEWORK OF MOTOR

INSURANCE
1.1 INTRODUCTION TO INSURANCE

The aim of all insurance is to compensate the owner against loss arising from a variety of
risks, which he anticipates, to his life, property and business. Insurance is mainly of two types:
life insurance and general insurance. General insurance means Fire, Marine and Miscellaneous
insurance which includes insurance against burglary or theft, fidelity guarantee, insurance for
employer's liability, and insurance of motor vehicles, livestock and crops.
The Insurance Act, 1972 and the General Insurance Business (Nationalisation) Act, 1972
govern Fire and Marine Insurance, while the Indian Marine Insurance At, 1963 governs marine
insurance in our country. These laws contain provisions relating to the constitution, management
and winding up of insurance companies and the conduct of insurance business of all types. All
insurance business in India has been nationalised.
A Contract of insurance is a contract by which one party undertakes to make good the
loss of another, in consideration of a sum of money, on the happening of a specified event, e.g.
Fire accident or death. Law recognises insurance as a system of sharing risk too great to be borne
by one individual.
Insurance in its basic form is defined as A contract between two parties whereby one
party called insurer undertakes in exchange for a fixed sum called premiums, to pay the other
party called insured a fixed amount of money on the happening of a certain event."
In simple terms it is a contract between the person who buys Insurance and an Insurance
company who sold the Policy. By entering into contract the Insurance company agrees to pay the
Policy holder or his family members a predetermined sum of money in case of any unfortunate

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event for a predetermined fixed sum payable which is in normal term called Insurance
Premiums.
Insurance is basically a protection against a financial loss which can arise on the
happening of an unexpected event. Insurance companies collect premiums to provide for this
protection. By paying a very small sum of money a person can safeguard himself and his family
financially from an unfortunate event.
For Example, if a person buys a Life Insurance Policy by paying a premium to the
Insurance company , the family members of insured person receive a fixed compensation in case
of any unfortunate event like death.

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1.2 MEANING OF MOTOR INSURANCE

The answer to this question is very simple as it comprises of two words i.e. motor +
insurance and motor means a vehicle of any sort which is running on the road and Insurance
means to provide cover for any unforeseen risk which may occur in day to day life. Then another
question arises what is unforeseen risk? You are walking on the road a car hits you from the
back, you get a fracture in your leg and while coming out you never thought that you will have
an accident but it happened and this is unforeseen risk i.e. a risk of happening of an event which
may happen or may not happen. So Motor Insurance as you all know is the insurance for motor
vehicles, there are various risks which are related with the loss or damage to motor vehicles like
theft fire or any accidental damage so as to provide coverage for this motor insurance is taken.

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1.3 HISTORY OF MOTOR INSURANCE

If we see in real life we can say that Motor Insurance is an important part of General
Insurance; it is the fascinating branch of insurance. This type of insurance has come into
existence from United Kingdom in the early part of this century. As you must be surprised to
know that the first Motorcar was introduced in England in 1894. The first motor policy to
provide coverage for third party liability was came into existence in 1895. Now you must be
wondering what is a third party liability? Third party liability includes third party and liability
incurred towards third party. Third Party means any party other then owner /driver or the
government, any liability occurring towards third Party due to use of motor vehicle is third party
liability. It can be in the form of bodily injury to third party or damage to third party property.
So at the beginning, only third party insurance came into existence but later on, in U.K
they realized the importance of insurance in terms of motor and with this an accidental
comprehensive policy also came into existence and later on the lines of U.K. we started using
approx the same policy.
In 1903 the Car and General Insurance Corporation limited was established mainly to
transact motor insurance, after this company a lot many other companies has come into existence
to transact this business. It has been realized that after World War I, there was a considerable
increase in the number of vehicles on the road and when we have the number of the vehicles on
the road there is an increase in the number of accidents. As the concept of insurance was not that
much in existence so lot of accidental damages were not at all recovered and the motorists faced
a lot of problems for getting their treatments and damages to their vehicles. After realizing this
the introduction of compulsory third party insurance through the passing of the Road Traffic Acts
1930 and 1934 was done. Later on these Acts have been consolidated by the Road Traffic Act
1960.
In 1939, India has also realized the importance of Motor Insurance and Motor Vehicle Act
was passed and came into existence in 1939. Earlier, only few people knew about motor
insurance but later on compulsory third party insurance was introduce by the Act on 1st July

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1946. We in India follow the same practice as that of U.K. Today we follow a set Tariff
provided by Tariff Advisory Committee where as now in U.K. Tariff business have been
withdrawn. As Motor Vehicles Act laid the provisions in 1939 and it required some amendments
that were implemented by the Motor Vehicles Act 1988 and it became effective from 1 st July
1989 and thats how the insurance concept has come to India.
As you all know in our country crores of vehicles are plying on the road and lot of
accidents occurred daily, and due to these accidents damages to material and third party occurs.
Third party is any person other then the owner. But the question arises how the loss is to be
compensated? After realizing all these problems it was made mandatory for all the vehicles
which are plying on the road to have an insurance which can provide coverage to general public
against the risk of loss or damage to motor vehicles and with this the motor insurance concept
has come into existence and Act made this insurance compulsory for everyone those who are
driving the vehicle on the road so it become quite popular among people and than motor
insurance policies become available to provide a comprehensive cover and a third party liability
cover.

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1.4 FEATURES OF MOTOR INSURANCE

Assured best deals on your Motor Insurance

Fair and Faster claims settlement

Discounts on back to back accident free years

Instant online renewal and issuance of your Motor Policy

Quick service on breakdown/accident with instant claim status updates

24x7-customer assistance for all product queries and claims information.

OTHER SALIENT FEATURES

For claims free experience, discount available on subsequent

Renewal

Discount available if voluntary excess opted for Discount available

for membership with approved automobile association

Discount available for installing approved anti-theft device

Depreciation, for the parts needing replacement in the accident is defined

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1.5 FUNDAMENTAL PRINCIPLES OF INSURANCE

1) INDEMNITY :
A contract of insurance contained in a fire, marine, burglary or any other policy
(excepting life assurance and personal accident and sickness insurance) is a contract of
indemnity. This means that the insured, in case of loss against which the policy has been issued,
shall be paid the actual amount of loss not exceeding the amount of the policy, i.e. he shall be
fully indemnified. The object of every contract of insurance is to place the insured in the same
financial position, as nearly as possible, after the loss, as if he loss had not taken place at all. It
would be against public policy to allow an insured to make a profit out of his loss or damage.
2) UTMOST GOOD FAITH:
Since insurance shifts risk from one party to another, it is essential that there must be
utmost good faith and mutual confidence between the insured and the insurer. In a contract of
insurance the insured knows more about the subject matter of the contract than the insurer.
Consequently, he is duty bound to disclose accurately all material facts and nothing should be
withheld or concealed. Any fact is material, which goes to the root of the contract of insurance
and has a bearing on the risk involved. It is only when the insurer knows the whole truth that he
is

in

position

to

judge

(a)

whether

he

should

accept the risk

and (b) what premium he should charge.

If that were so, the insured might be tempted to bring about the event insured against in
order to get money.

3) INSURABLE INTEREST:

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A contract of insurance effected without insurable interest is void. It means that the
insured must have an actual pecuniary interest and not a mere anxiety or sentimental interest in
the subject matter of the insurance. The insured must be so situated with regard to the thing
insured that he would have benefit by its existence and loss from its destruction. The owner of a
ship run a risk of losing his ship, the charterer of the ship runs a risk of losing his freight and the
owner of the cargo incurs the risk of losing his goods and profit. So, all these persons have
something at stake and all of them have insurable interest. It is the existence of insurable interest
in a contract of insurance, which distinguishes it from a mere watering agreement.
4) CAUSA PROXIMA:
The rule of causa proxima means that the cause of the loss must be proximate or
immediate and not remote. If the proximate cause of the loss is a peril insured against, the
insured can recover. When a loss has been brought about by two or more causes, the question
arises as to which is the causa proxima, although the result could not have happened without the
remote cause. But if the loss is brought about by any cause attributable to the misconduct of the
insured, the insurer is not liable.
5) RISK:
In a contract of insurance the insurer undertakes to protect the insured from a specified
loss and the insurer receive a premium for running the risk of such loss. Thus, risk must attach to
a policy.
6) MITIGATION OF LOSS:
In the event of some mishap to the insured property, the insured must take all necessary
steps to mitigate or minimize the loss, just as any prudent person would do in those
circumstances. If he does not do so, the insurer can avoid the payment of loss attributable to his

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negligence. But it must be remembered that though the insured is bound to do his best for his
insurer, he is, not bound to do so at the risk of his life.
7) SUBROGATION:
The doctrine of subrogation is a corollary to the principle of indemnity and applies only
to fire and marine insurance. According to it, when an insured has received full indemnity in
respect of his loss, all rights and remedies which he has against third person will pass on to the
insurer and will be exercised for his benefit until he (the insurer) recoups the amount he has paid
under the policy. It must be clarified here that the insurer's right of subrogation arises only when
he has paid for the loss for which he is liable under the policy and this right extend only to the
rights and remedies available to the insured in respect of the thing to which the contract of
insurance relates.
8) CONTRIBUTION:
Where there are two or more insurance on one risk, the principle of contribution comes
into play. The aim of contribution is to distribute the actual amount of loss among the different
insurers who are liable for the same risk under different policies in respect of the same subject
matter. Any one insurer may pay to the insured the full amount of the loss covered by the policy
and then become entitled to contribution from his co-insurers in proportion to the amount which
each has undertaken to pay in case of loss of the same subject-matter.

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1.6 TYPES OF MOTOR INSURANCES POLICIES

The All India Motor Tariff governs motor insurance business in India. According to the
Tariff, all classes of vehicles use two types of policy Forms. They are Form A and Form B. Form
A, or what is commonly known as Act Policy, covers Act Liability, which is a compulsory
requirement of the Motor Vehicles Act. No vehicle can be used without this minimum insurance
cover. Use without such insurance is a penal offence. The following liabilities can be covered in
this policy:

Unlimited Liability towards Third Party bodily injury;

Liability towards Third Party Property Damage to the extent of Rs. 6000/- only;

Unlimited liability towards bodily injury of passengers of the vehicle;

Liability towards employees of the owner of the vehicle while traveling in or using it, against
bodily injury, to the extent required under the Workmens Compensation Act.
Form B, or what is commonly known as Comprehensive Policy, is an optional cover, which

takes care of the following additional losses and liabilities:

Loss or damages to the vehicle and its accessories and extra fittings protection and removal
costs, and towing disabled vehicles (only for commercial vehicles).

Liability towards Third Party Property Damage, in excess of Rs.6000/-.

Liability towards employees under Common Law and Fatal Accidents Act, over and above
the liability under Workmens Compensation Act.

Personal Accident Benefits for the owner, passengers and employees.

The above or liabilities can be separately covered in conjunction with the liabilities covered
under the Act Policy, by taking a Comprehensive Policy paying an additional premium.

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FORM A POLICY
As per the provisions of Motor Vehicles Act, all the vehicles plying in the Territorial Limits
of India must possess an ACT POLICY at all times. The violation is punishable with fine etc., as
per Motor Vehicles Act (as prevalent at the time of detection). As described earlier, this policy
covers:
1. Third Party Property Damage / Bodily Injury (Fatal or Non-fatal) when Insured vehicle is
used in a public place,
2. Insureds legal liability, as per Motor Vehicle Act, arising out of accident caused by or arising
out of the use of the vehicle anywhere in India, and
3. Such liability as above in respect if injury (fatal or non-fatal) to any third party and damage
to any third parties property.
The owners of the vehicle having insurable interest in it undertake this policy. The period of
the cover is generally a period of 12 months from the date of inception. However, Short period
covers are also available at higher rates. Subject to limit of liability laid down in the Motor
Vehicle Act, the policy pays the insureds legal liability for death/disability for third party, loss or
damage to third party property. Also, the liability for claimants cost is also met (Maximum Rs.
6000/-) unless additional premium for opting unlimited cover is paid. In addition, all costs and
expenses incurred with insurers written consent are paid.
In case of death of the insured/person entitled to compensation for a liability incurred under
this policy, his legal heirs will be indemnified as in the case of the Insured, subject to the
limitations of use of the vehicle provided that the Driver was holding a valid and effective
driving license.
Third Party (A person other than Insured and the Insurer) who is injured/dies due to an
accident with the Insured, the amount of compensation adjudged by the Motor Accident Claims

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Tribunal is made good by the insurers and is payable to the legal heir of the deceased or the
injured. The amount of compensation is unlimited / has no preset limit.
All costs and expenses are incurred by the insured with Insurers written consent. The
compensation payable to Third Party for damage to its property (moveable or fixed) is restricted
to Rs. 6000/- {Rupees Six Thousand Only}, irrespective of the amount adjudged by the Motor
Accident Claims Tribunal / court. This compensation limit can be increased to unlimited by
paying of an additional Premium at the time of taking insurance. All costs and expenses incurred
by Insured with Insurers written consent.
Claims arising out of and in the course of employment of a person in the employment of a
person of the Insured are compensated to the extent of Rs. 20,000 when an Employee (other than
paid driver) is in the driving seat.
When vehicle is used outside the geographical area, when used contrary to limitation as to
use, driven by a person other than the driver as stated in the clauses mentioned in the policy of
insurance.
FORM BPOLICY
Form B is an optional cover, which offers some specific advantages. Although the Act
Policy Form A is identical for different classes of vehicles, the comprehensive policy cover
differs for various classes of vehicles; the comprehensive policy cover differs for various classes
of vehicles. For private cars and motorcycles, there are two sections in the comprehensive Policy.
Additionally, Section III is provided for commercial vehicles.
I. It concerns loss or damage to the vehicle and covers the risk like:

Fire, Explosion, Self-ignition and Lighting

Burglary, Housebreaking and Theft

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Riot, Strike, Malicious and terrorism Damage

Earthquake

Flood, Typhoon, Hurricane, Storm, Tempest, Inundation, Cyclone, Hailstorm

Accidental External Means

Transit by road, rail, inland waterway, lift, elevator or air.

For motorcycles and commercial vehicles, the risk of frost damage is also covered. From the

above coverage, for all classes of vehicles, the risks of riot, strike, malicious and terrorism
damage, earthquake and flood and storm; can be opted out of with a consequent discount in
premium. In addition to these, cover is also available for protection and Removal Costs and
authorisation of Repairs. If a motor vehicle is disabled as a result of loss or damage due to the
perils mentioned above, the insurance company bears the reasonable cost of protection and
removal to the nearest repairer and the cost of redelivery to the owner /insured subject to a
maximum limit, in respect of any one accident. The limit for various class of vehicle are as
follows:
Motor Cycles/ Scooters
Private Car & Taxis
Other Commercial Vehicles

Rs.300
Rs.1500
Rs.2500

The owner / insured is also allowed to authorize repair expenses upto Rs. 500 /- per accident.
II.

It covers the liability towards third parties, i.e., liabilities of bodily injuries and
property damage.

III. It is applicable to commercial vehicles. It covers the vehicle while it is being used

for the

purpose of [Towing Disabled Vehicles. This section covers Third Party Liabilities that the
insured vehicle or the one being towed for reward / remuneration. Further, the insurance
company is also not liable for damages to the towed vehicle or any property being conveyed
thereby.

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CALCULATION OF PREMIUMS

In case of Comprehensive Insurance Cover, for the purpose of premium, vehicles are
categorized as follows:
a) PRIVATE CAR
This is used for personal purpose. The premium is computed on the following basis:

Geographically area of use and cubic capacity

Value of the vehicle.

Accessories are to be specified separately under electrical and non-electrical items.

b) TWO-WHEELER
It is used for personal only. Premium is calculated on cubic capacity and value of vehicle.
Accessories are to be specified. Theft of accessories is not covered, unless the vehicle is stolen at
the same time.
c) COMMERCIAL VEHICLE
This is a vehicle used for hire and is classified as follows:

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Goods-carrying commercial vehicle: In this case premium is calculated on carrying capacitygross vehicle weight and value of the vehicle. Accessories extra, as specified.

Passenger-carrying commercial vehicle: In this case premium is calculated on carrying

capacity of the vehicle-number of passengers and value of the vehicle. Accessories extra, as
specified.

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1.7 NEED FOR AUTOMOBILE INSURANCE

In Indian conditions, the vehicles are subject to many hazards like potholes, open
manholes, puddles, untarred roads, traffic management system, poor pedestrian management, and
absence of footpaths for pedestrians, jaywalkers, increasing number of accidents etc. which
accentuate the need for automobile insurance. Some of these hazards are discussed below:
i) FOOTPATHS
As footpaths are encroached by hawker, pedestrians have a tough time dodging vehicles to
reach the other end of the road. Large potholes and manholes are a common sight and during the
monsoon the situation can get only worse causing untold damage to your vehicle.
ii) DRUNKEN DRIVING
Drunken driving is another very common feature. Be it a car, a two- wheeler, or even a
truck, drunken driving is one of the major reasons for increase in accidents. Through drunken
driving is a punishable offence the penalty has hardly proved to be a deterrent.

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iii) RECKLESS DRIVING

Besides, rash driving by youngsters is another of the dangerous realities that you should
consider. Majority of the youngsters drive recklessly caring little for the law, causing serious
accidents resulting in loss of life or limb.
iv) THEFT
Cases of stolen cars are on the rise. Experts in stealing cars are well aware of the
loopholes that can be exploited and accordingly have also been successful I manipulating with
the chasis number of vehicles in order that they are not traced.
v) FIRE
Other than these there is also a danger of fire or theft of vehicle. Therefore, vehicle
insurance under such unsafe conditions is a must not only to cover the financial liability that may
arise from an accident in which the other party is injured. The cost of repairs that you would have
to pay to the other party in case of an accident may be exorbitant. Besides if the accident
involves hospitalization too, the expenses can go through the roof. It would be a great burden if
all these costs are borne by the individual. The insurance company can indemnify against such
losses and the financial liability arising thereof.
If the auto insurance is not made compulsory, there is a strong possibility that some may
not buy these voluntarily. This is because most of them think that the cost of accidents or losses
will fall on others or they underestimate the risk the loss. Economic arguments for compulsory
insurance laws in these people to consider more of the costs of their actions when deciding
whether to drive, what kind of car to buy, how safely to drive, and so an.

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The economic rationale for insurance may be that it affects peoples decision to drive.
Some people are likely to forgive driving if the insurance is made compulsory insurance is made
compulsory since it acts as a financial disincentive. Another could be that it encourages people to
drive safely, which may reduce of risk. Those who criticize compulsory auto insurance plead that
it results in lowering the disposable income or it results in lowering the disposable income or it

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1.8 BENEFITS OF MOTOR INSURANCE.

Now Buy Online facility Save on your Motor Insurance policy.

Cashless claims at over 1500 preferred workshops pan India, 75% on

account payment when cashless facility is not available.

You can transfer your existing No Claim Bonus from any Insurance provider
ranging from 20% - 50%

0% EMI option available on payment.

Instant claims assistance and instant updates on your claim status on sms though
our 24x7 call centers are available.

Towing facility in an event of a breakdown/accident

24/7 service by phone or online-even on holidays

Huge savings with a comprehensive coverage for your vehicle

Preferred workshops give you access to hassle free inspection, high service
standards and cashless settlement of claims in event of an accident/breakdown

Instant online policy renewal and issuance in just 4 easy steps that allows you to
have a peace of mind for another year.

With 24x7 assistance, you can be sure we will be there for you whenever you need

BENEFITS OF COMPREHENSIVE POLICY COVER- AN ILLUSTRATION

Mr. Tom has an Act Only policy covering his private car. He employs a paid driver. While
driving the vehicle, after dropping Mr. Tom at his office, the vehicle collides with a truck and the
driver dies on the spot. Being an old car, Mr. Tom had nothing much to lose and that is why he
had not taken a Comprehensive Policy. However, the family of the driver lost their breadwinner.
As an employer, Mr. Tom is liable to compensate for the driver, since he was driving the vehicle
in course of employment. The Motor Vehicles Act, 1988 makes it compulsory to insure liabilities
under Workmens Compensation Act.

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According, the legal heir of the deceased driver filed an application to the labour
Commissioner and an Award of Rs. 1, 50,000 was passed against the employer. Mr. Tom,
equipped with an Act Policy, approached the insurance company, who in turn satisfied the
Award. The legal heir of the driver received the compensation from the labour court soon after
and everyone was happy.
The liability for compensation as per the Workmens Compensation Act, depends on the
wages of the employee and his age, and represents mainly the loss of earnings. However, other
losses representing mental pain and agony for the family, loss of consortium, future expenses on
dependents and loss of prospective earnings are not accommodated in this compensation.
The legal heir of the driver, in the instant case then approached the Motor Accident
Claims Tribunal, demanding a compensation of Rs. 1, 00,000 towards these losses. The tribunal
passed an award of Rs. 50,000, found reasonable as per provisions of Common Law and Fatal
Accidents Act. Mr. Tom had an Act Policy, which did not cover this liability, and he saddled with
the responsibility of satisfying the court Order. You can imagine the financial burden he had to
bear. Had he taken to face this difficulty. The insurance company would have paid this additional
amount of compensation too. It is, therefore, always beneficial and advisable to take a
comprehensive policy covering these liabilities.
EXCLUSIONS TO THE COMPREHENSIVE INSURANCE COVER
This insurance does not cover loss or damage caused due to:
1. Driver being under intoxication
2. Vehicle being driven by a person not holding an effective,
valid licence. It also does not cover:
3. Damage to tyres (unless the vehicle is also damaged).
4. Wear and tear, mechanical breakdown.

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1.9 MOTOR INSURANCE CLAIMS

1.9.1 OWN DAMAGE CLAIMS FOR MOTOR INSURANCE.

Documents:Following Documents generally required for settlement of motor claims. However depending
on the merits of the case, a particular document may not be an alternate document could be used
to serve the purpose of the insurer.
1. Claim form required to be completed.
2. Registration Certificate: the details usually verified from the RC can instead be obtained
from purchase details of the vehicle if the circumstances so warrant.
3. Driving License: as per policy condition the driver is required to hold an effective driving
license both in terms of the period validity and the class of vehicle that is being driven at the
time of the accident. The MV Act provides for a grace period of 30 days after expiry of a
license during which period the license may be accepted as effective, provided the holder has
not been qualified from holding a license. For loss sustained by parked vehicles, driving
license may be relevant.
4. Load Challan/Trip Sheet: to verify that the load carried was within the permissible limits
and trip sheet giving details of number of passengers carried in the vehicle.
5. Fitness Certificate: the fitness certiicate indicates the roadworthiness of a commercial
vehicle.

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6. Report to police: a copy of the FIR and Panchanama is required wherever third parties are
involved in an accident.
7. Survey Report: surveyor ascertains the damage, assess the quantum of payable claim, verify
vehicular documents and confirm that the loss/damage being claimed for is in conformity
with the narration of the accident. Wherever replacement of p [arts is allowed surveyors with
the narration of the accident. Wherever replacement of parts is allowed surveyors physically
verify serial numbers as appearing on major parts, which carry such numbers.
1.9.2 PROCEDURE:

In order to proceed for claim, the insured immediately informs the insurer.

The policy documents are verified to ensure that the policy is force and the loss is entered in
the claims register and the claim form is issue to the insured to be completed and returned.

The insurer, immediately on receipt of intimation of loss, either in writing or over telephone,
a surveyor is appointed based on the estimate.

In case of major accidents, the insured would be asked to arrange for photographs of the
vehicle at the spot of the accident, showing all the external damages and the number. Plate of
the vehicle. The photo expenses are to be reimbursed upto Rs. 500. Alternatively, the insured
may inform the nearest office of the insurer to arrange for such photographs.

The survey report is examined and settlement is done based on surveyors recommendations.

If reinspection after repair is considered necessary it may be conducted by the same surveyor
who has assessed the loss.

Conventionally, the payment is made to the repairer directly.

If for any reason, to be specified, the driving license cannot be produced, the claim may be
considered only on the basis on non-standard basis. However for settlement of such claims
the authority is not endorsed for tourist taxis, since, different practices prevail in different
states, it is on the basis of the practice. Prevailing in the state where the accident occurs and
this will be decided by a manager and above in the RO.

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1.9.3 PARTIAL LOSS CLAIMS FOR MOTOR INSURANCE.

1. Submission of bills/cash can be dispensed with for claims upto
Rs. 50,000 in respect of private cars and two wheelers only, subject to.

The survey report correctly indicating the cost of parts allowed for replacement

Claims being settled on the basis of a report of reinspection after repairs by the surveyors
certifying that the repairs and replacements have to be obtained and verified.

2. If surveyor confirm replacement of the engine and chassis if

allowed for replacement and indicates the new numbers,
claims may be settled whilst simultaneously advising the insured that.

As per the provision of the Motor Vehicles Act, the new numbers have to be incorporated in
the RC book.

Insurance company be informed about the incorporation of the new numbers in the RC book
for endorsing on the policy document to facilitate settlement of future claims.

Where the vehicle is totally damaged or when the net cost of repairs is almost close to the
market value of the IEV the claim could be considered to be a total loss. Such total loss
claims should be encouraged on net of salvage basis i.e., salvage being retained by the
insured and an appropriate amount towards salvage value as determined by the surveyor in
consultation with the company be deducted from the total loss amount.

However, if the insured to retain the salvage, arrangements should be made for the safe
custody is informed vehicle to prevent further loss or damage.

1.9.4 THEFT CLAIMS FOR MOTOR INSURANCE.

1. Partial Loss due to Theft: Theft of parts/ accessories from a vehicle should be reported to
the police immediately by the insured. If parts are found missing or changed after recovery of
stolen vehicle this be recorded in Panchanama / recovery memo. Final police investigation
report will also be required. However, if the competent authority is satisfied about the

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genuineness of the loss, final investigation report may be waived provided the insured sends
a registered AD letter to the SP/ACP requesting that the insurer should be informed of any
recovery.
2. Total Loss due to Theft: Unless claims setting authority is fully satisfied, investigation of
the theft to be arranged by an investigator who may be appointed with specific terms of
reference.
3. The following documents should be collected from the insured in addition to a certified copy
of the FIR, for considering on account payment of the admissible claim after expiry of 90
days from the date of loss.

Surrender of the Registration Book and the Tax Book to the insurer duly transferred in the
name of the insurers. The RTO is to be informed about the theft of the vehicle and this should
be entered in Tax Book so that further tax will not accrue.

Letter of indemnity and subrogation.

Ignition keys of the vehicle.

Certificate of insurance and the original insurance policy, if not stolen with the vehicle.

Specially worded discharge voucher.

4. The balance payment may be released on receipt of the Final Police

Investigation Report

or on expiry of a suitable waiting period from the date of the on account payment, after
obtaining the discharge voucher in full and final settlement of the claim.
5. the police and the registration authorities and the NCRB should be notified in writing about
disposal of the claim on total loss basis following theft of the vehicle. They should be
requested to advise from the police regarding recovery of the vehicle, necessary steps for
taking possession of the vehicle from the police custody should be taken and, if necessary, an
advocate should be appointed for filing recovery application in the court.
6. Municipal Authorities, where applicable and the RTO should be advised by registered letter
with Acknowledgement. Due to record non use of the vehicle on account of theft and about
the cancellation of the Insurance Certificate.
7. If the vehicle is recovered subsequently, the insured will have the option to repay the claim
amount already paid and retain the recovered vehicle. If the vehicle is found damaged, the

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insured will be indemnified against loss of damage. The insured should be advised to obtain
recovery memo from the police and to get the vehicle surveyed at the police station before
taking delivery, as mentioned under loss theft claims.
8. In cases of criminal breach of trust each case should be dealt with an individual basis
depending upon facts of each case and subject to legal opinion.

1.9.5 THIRD PARTY BODILY INJURY CLAIMS: FATAL AND NON FATALFOR
MOTOR INSURANCE.
1. Intimation of Claim: Intimation about an accident resulting into third party claim is received
through various sources:

Insured directly or by mention in passing whilst lodging own damage claim.

Claimant

MACT/Courts by notice

Through accident report from police in Form 54 prescribed under Central Motor Vehicles
Rules, 1389.

2.

Investigation: Investigation about the accident to collect the relevant data to quantify
reasonable and just compensation as per the specified formats in respect of all third party
claims is mandatory. The companies should ensure that this investigation helps the insurance
company in finalizing out of court settlement at the earliest.

3.

Appointment of Advocate: On receipt of notice from the MACT a competent advocate

from the panel may be appointed if necessary. The following relevant documents and
information should be given to him/her immediately to enable him /her to draft written
statement (w/s)on behalf of the company and ensure that the proper defense is taken where
necessary and no frivolous statements are made.

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4. Policy Copy: Duly certified true copy of the complete policy with the relevant clauses and
endorsements as actually attached with the original issued covering the vehicle at the
material time of accident.
5. Driving license: In case it has been observed that driver was not duly licensed the necessary
information should be given to the advocate. Through under Section 149(2) of the MV Act,
1988, Insurance Company has no liability if the driver is not duly license rests on insurance
company and this obligation is required to be discharged fully to the satisfaction of the court.
6. Compliance Policy Conditions: If a breach of a specific condition has been observed it
should be brought to a notice of the Advocate to enable proper defense if possible.
7. a) Written statement on behalf of the insurance company incorporating all defenses available
as enumerated under Section 149 of MV Act should be promptly filed.
b) Wherever necessary when there is collusion between the insured and the claimants or
when the insured fails to defend claim, the companys advocate must be instructed to obtain the
MACTs permission under Section 170 of the MV Act to defend the claim on merits.
8. Payment of No Fault Liability Claims: If Liability under affected policy is established after
taking into consideration the foregoing defenses, company should take immediate steps to
deposit No Faulty Liability amount as per Section 140 of the MV Act, 1988.
9. payment of Fault Liability Claims: Companies may initiate action to settle such claims
either through

Jald Rahat Yojna

Lok Adalats

Direct negotiation with the claimant through DICC & RICC.

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10. Jald Rahat Yojna: Section 152 of MV Act, 1988 authorizes insurance company to settle
motor third party non-fatal bodily injury claims where claimant is an adult without claimants
taking recourse to MACTs. Industry has already Launched the Scheme since 1991.
1.9.6 GUIDELINES FOR PLACING CLAIMS IN LOK ADALATS
FOR MOTOR INSURANCE.

Maximum participation and disposal of large number of claims in lok Adalats sessions should
be in short.

Companies should placed the claims normally falling within the following parameters before
lok Adalats:

1) Where occurrence of the accidents is within the policy periods.

2) Where estimated liability is not expected to be exceeding rupees 5 lacs per application for
compensation.
3) Where no substantial point of law is involved.
4) Where no defenses are available under section 149 of the MV Act, 1988, such as driver not
holding effective driving license and breach of policy condition relating to limitation as to
use.
5) Where policy record shows that the driver was holding effective driving license.
6) Where despite concerted efforts on the parts of the insurance companies. they are not in a
position to prove conclusively to the satisfaction of the court that the person drove the
vehicle not duly licensed.
7) Since there is provision of automatic transfer of insurance in pursuance of section 157 of MV
Act, 1988 the companies cannot take defense of non transfer of insurance of vehicle on their
books.
8) Where more than one vehicle insured with different insurance companies
is involved in an accident resulting in to third parties claims, companies should agree for
settlement of 50-50 basis to apportion the liability between them.

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Companies should not accept conditional settlement such as subject to verification of certain
documents, production of documents etc.

On having reached the agreement for compromise settlement concerned MACT issues a
Consent Order specifying inter alia the period during which the agreed amount should be
deposited. On receipt of such order, companies must deposit the amount as agreed to with the
MACT within 30 days from the date of award as per schedule.

In the event of lok adalat for pending appeals before High Courts is organized, such claims
where quantum of compensation is in dispute may be considered.

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Chapter 2

AUTO POLICY IN UNITED STATES

The Personal Auto Policy, Famous In The U.S. Includes Four Main Types Of Coverage:

third party liability coverage for liability to third parties harmed by negligence of an
insured person;

first party medical payments coverage for the insured, or in states with no-fault or related
laws, personal injury protection coverage for the insureds medical expenses and loss of
income;

uninsured and under insured motorists coverage for losses caused to an insured by drivers
without liability insurance and drivers with comparatively low liability insurance limits; and

Coverage for physical damage to or theft of insured autos.

The auto liability coverage in the personal auto policy provides broad coverage for liability for
bodily injury and property damage to other parties arising out of the use of an automobile by an
insured person. As is customary with the liability insurance, the insurer also agrees to defend the
insured and bear the defense costs and is responsible for negotiating and setting the claims.
Personal auto liability coverage may be sold with a single limit that specifies the maximum
amount that the insurer will pay for all damages from a single accident.
Under the first-party auto medical payments coverage, the auto owner can receive payment for
medical expenses arising out of an accident. Coverage is for the medical
expenses for the named insured and family members hurt in any auto and other persons that are
hurt while occupying a covered auto. Coverage limits under such policies are comparatively low.

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In U.S.with no-fault or related laws, the personal auto policy includes personal injury protection
coverage for the named insured, family members, and parties hurt while occupying a covered
auto instead of medical payment coverage.

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CHAPTER 3

FACTORS CONSIDERED FOR PREMIUM RATING

Automobile insurance pricing has always been a matter of controversies to the consumers,
service providers and the regulators. Auto claims have increased significantly in India since last
10 years. Auto insurance rates charged to different customers reflect differences in the discounted
expected costs of providing coverage. In order to classify different persons into homogenous
groups with respect to expected claim costs, insurers generally use rate classification system that
includes:
driver classes that reflect the characteristics of individual insured, and territorial rating to reflect
expected differences in claim costs for people that live in different geographical areas (holding
individual characteristics constant). Of course, physical damage rates also depend on the type of
vehicle, given evidence that certain vehicles are more likely to be involved in at-fault accidents.
The major factors considered in establishing driver classes and the use of territorial rating factors
are:
DRIVER CLASSES
The parameters are Age, Gender, and Martial Status, use of automobile, driving education and
driving record. The insureds in younger age group, the males, the married ones and new and
inexperienced drivers have on average high accidental claims. The loading on the premium
increases by the numbers and amount of accident claims.
TERRITORIAL RATING
Large cities have higher average claim costs followed by suburban areas, smaller cities, and
small towns or rural areas. In India, the geographical areas have been classified into Group A and
Group B.
Motor/ Automobile Insurance business in India is governed by the All India Motor Tariff, which
lays down the premium rates, terms and conditions. The main factors taken into consideration for

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rating in India are vehicle classifications on several parameters, the geographical area of
operations and experiences.
VEHICLE CLASSIFICATION
Vehicles are generally classified on the basis of its technical specifications, its value or use.
TECHNICAL SPECIFICATIONS (The Type)
The typology of a vehicle is more or less based on its cubic vehicle weight and its carrying
capacity. Heavier vehicles are more exposed to accidents since the resultant damages they incur
are more. Similarly, vehicles with higher carrying capacity expose more passengers to risk.
Therefore heavier vehicles attract higher premium rate. In private cars, taxis and motorcycles, the
factor is the cubic capacity. The more the cubic capacity, the higher the premium rate. Whereas
in goods-carrying commercial vehicles and passenger-carrying commercial vehicles, the criteria
are gross vehicle weight and passenger carrying capacity respectively.
THE VALUE OF THE VEHICLE
The premium rate is applied on the value of the vehicle to arrive at the premium payable. It is the
owner/insured who has to select a correct value of the vehicle and declare the same for
insurance. This value is known as the Insureds Estimated Value (IEV) in motor insurance and
represents the sum insured.
Normally, this value is arrived at by considering the age of the vehicle and its present purchase
price. A Maruti 800 was purchased in 1998 for Rs. 1, 80,000/- considering the conventional 10%
depreciation each year and the present purchase price of a similar vehicle at Rs. 2,00,000/- the
IEV for year 2000 is Rs. 1,80,000 less 20% of Rs.2,00,000 = Rs. 40,000.00
IEV = Rs. 1, 40,000.00
However, this is not sufficient for deriving the correct IEV of the vehicle in terms of motor
insurance. In motor insurance, the basis for payment of claims in the market value of the vehicle

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at the place and time of loss. This market value may be understood as, the price that the vehicle
would fetch in the second-hand market. For certain vehicle, there is a good demand in the
second-hand market. Maruti is one of them. The 1998 model mentioned above may fetch a price
of say, Rs. 1, 50,000. In such situation, the correct IEV for the Maruti of 1998 model should be
Rs. 1, 50,000.
Now take the case of a Premier Padmini car of 1998 was say, Rs. 1, 80,000/- the depreciated
value in year 2000 works out to Rs. 1,40,000. But, the second-hand value would be at most Rs.
30,000, since it has virtually no demand in the market.
In this case, the correct IEV should be Rs. 30,000/- only. It is not worthwhile to insure your
vehicle at a higher value since that will increase the premium payable but, in case of total loss,
only the market value would be payable.
In motor insurance, the IEV is the limit of liability per accident and not for the entire period of
insurance. In cases of partial loss or losses, which may be made good by repairs, there is no limit
to the number of accidents in any period of insurance. Suppose the Premier Padmini car, as
described above, claims for two accidents in the year 2000, the first for an amount of Rs.
20,000/- and the second for Rs. 15,000/- under its insurance policy with IEV of Rs. 30,000/- both
these claims can be recovered from the insurance company, since their respective values are
within the limit of IEV, irrespective of the fact
that the insured in this process recovers more amount during the period of insurance than he was
insured for.
However, if the vehicle is totally lost or damaged and cannot be repaired, the insured would be
paid the market value or IEV, whichever is less. It is very important to select a correct IEV for
insurance. There is a tendency of motor vehicle owners to declare a lower value for insurance to
reduce the premium expenditure. Although, insurance companies

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check the IEV for its sufficiency before accepting the insurance, this is not a correct practice as
the insured is exposed to a greater loss in case the vehicle is totally lost or damaged.

THE USE OF THE VEHICLE

Risk exposure varies in relation to the use the vehicle is put to. Private cars are lesser exposed
than taxis, as the latter is used extensively for maximum revenue. Taxis therefore attract a higher
premium rate. Similarly, goods carrying vehicles, which are used as private carriers and
transport, only their owners goods attract a lower premium, than those used as public carriers for
transporting goods for hire.
THE GEOGRAPHICAL AREA OF OPERATION
The area of operation of a vehicle also has a direct bearing on the premium rate. This is so
because, certain areas of operation are more congested with high densities of population and road
traffic than others and poses higher exposure to accidents. For this purpose, the tariff
differentiates two zones in India, i.e. Zone A and Zone B, for private cars and taxis. Zone A
represents the Kolkata region, Delhi region and Mumbai city. In zone B, the densities of
population and road traffic are more and hence attract a higher premium rate.
Such differential rating does not apply to commercial vehicles such as trucks and buses, as these
vehicles normally travel throughout India for their operation. However, discounts is allowed on
the premium for commercial vehicle used as contract carriage, school buses, public and private
buses for carrying passengers/workers and operate within a radius of 50 kilometers from the city
limits

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Details of States under Zone A & Zone B

Andhra Pradesh
Goa, Daman, Diu
Gujarat
Karnataka
Kerala
Madhya Pradesh
Maharashtra

Zone A
Andaman &Nicobar Islands
Arunachal Pradesh
Assam
Bihar
Delhi
Haryana
Himachal Pradesh

Zone B
Mumbai City
Nagaland
Orissa
Punjab
Rajasthan
Sikkim
Tripura

(Excluding Mumbai City)

Pondicherry
Tamil Nadu

Lakshadweep Islands
Manipur
Mizoram

Uttar Pradesh
West Bengal

THE CLAIMS EXPERIENCE

Unfavorable claims experience is obviously a bad risk. The tariff has adopted a system called the
No Claim discount, to give discount of good claims experience and a loading for bad
experience. The claim experience of expiring of expiring years policy is the basis for allowing
discount or charging a loading.

Chapter 4

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MOTOR INSURANCE CURRENT AND EMERGING

SCENARIO
India is witnessing a boom in car and bike sales and it could not have come at a better time. The
burgeoning middle class and the improvement in roads and highways have only accentuated the
vehicle sales. The spill over effect of this boom has let the motor insurance portfolio of insurance
companies also on the growth highway
SCENARIO PRE-2001 ERA - DEALER'S AND INSURER'S PERSPECTIVE
In fact, it will be interesting to know what happened prior to 2001 and I would like to highlight
some of the issues prevalent at that time. Let's first look at it from the dealers' perspective. The
concerns were

They used to get commission as little as 5% and that too in non-financed cars.

Only 18% of the car policyholders used to make claims.

There was no system to chase renewals and the only interaction point with the insurance
company was the development officer.

In short, insurance was a low priority for the dealer as well as the manufacturer.
On the other hand from the insurer's perspective, motor insurance was a loss-making portfolio
and at best a nuisance. There was no real strategy to control claims and the poor customer
interface was accentuated with excessive dependence on independent surveyors. There was no
data

capturing

or

analysis

for

customer

segmentation.

PARADIGM SHIFT IN 2001

The liberalisation in 2001 lead to a paradigm shift and changed the perspective of how dealers,
motor manufacturers viewed motor insurance. We at Bajaj Allianz adopted a

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dealer centric business model, where commission income was increased, and introduced better
customer convenience by enabling policy issuance at dealership location. As a result, body shop
income increased by 100%. We also had strategic partnership with auto manufacturers like
Maruti Udyog Limited and Ford Motors. We are looking at this portfolio with a strong
commitment and our focus would be on data capturing/ analysis besides our core competence in
claims management and service.

CURRENT SCENARIO
The scenario is much different today and motor insurance gets its due importance. Motor
insurance today constitutes 60% of the portfolio for most of the general insurance companies in
the world. The trend would be the same in India also. In 5 years, the motor insurance is slated to
increase from Rs. 8,000 crores to Rs. 20,000 crores. Currently, it is 41 % of the total general
insurance business up from 36% five years back. The current state of motor insurance as
prevailing today can at best be summarised as below

Insurance has become the important driver for dealer profitability and customer satisfaction;

Motor insurance especially private cars, is an area which all insurers want to develop;

Continuous increase in cost and charges for labour & parts and higher awards for third party
claims are pushing the claims ratio up.

The next paradigm shift could happen when de-tariffing happens. The fastest growing
regions are Deihi, Andhra Pradesh, Karnataka, Maharashtra and Gujarat.

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EMERGING SCENARIO - IMPACT OF DE-TARIFFING

It is asked what would be the impact of de-tariffing on the motor insurance portfolio, for which I
have this standard answer - A known devil is better than the unknown. I would say that the actual
impact can only be felt when it actually happens, as the depth of the water can only be felt when
we swim in it.
Nevertheless, some learnings from other countries would help so that we can prepare for the
eventuality. As experienced in other countries, the premium rates can plummet and sometimes
unrealistically. When motor insurance is an additional and consistent revenue stream for the
dealers, one can imagine the impact, which can be dreadful. So, I feel customer segmentation is
the

only

way

to

survive

in

price

driven

market.

Country like Italy, which was de-tariffed in mid-nineties provides some good learning points.
The size of the country would be smaller than any of an average Indian state; however, the
country has been divided into 620 geographic risk zones for insurance rating purpose and
insurance companies use up to 76 variables for rating. In contrast, India has only 2 zones so far.
Further, there are no proper tariffs available.
One thing that is certain among all the uncertainties is that de-tariffing would change the scenario
dramatically and may also impact the biggest profit driver for the dealer. Some of the changes
that I foresee areas below

Premium rates could vary significantly based on make, model & geographic zones.

Dealers will face increased competition from agents in renewals as "information" in proposal
forms is much better at the agents hand.

Insurers may be forced to develop non-dealer channels to reduce commission & average
claim size as pressure on margin will increase.

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WHAT'S

SEMESTER VI

IN

IT

FOR

DEALERS?

A pertinent question in the minds of the dealers would be - "What's in it for us?" Well, it can be
an opportunity or threat as an individual sees it. I would say, it is an opportunity for both the
dealers and the insurers provided you look for strong partner and long-term partnerships with
insurers for mutual benefit, such as

Repair instead of replacement - this will be beneficial for dealer & insurer;

Instead of reducing premium, look at additional insurance product like depreciation

cap/conveyance expenses/extended warranty;

Big dealers have opportunities to set up facilities for repairing all makes and models.

A hypothetical example of how repair instead of replacement would be beneficial to the dealer
and the insurer can be explained as below

COST IF DOOR IS REPLACED:

Part cost Rs. 14,500/- + Labour replacement: Rs. 350/-

Net profit for repairer: Rs. 2,475/-

Net liability on insurer: Rs. 14,850/-

COST IF DOOR IS REPAIRED WITH SKIN:

Cost: Rs. 3,500/- + skin replacement: Rs. 2,100/-

Net profit for repairer: Rs. 2,625/-

Net liability on insurer: Rs. 5,600/-

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Chapter 5
Case study
Claims settlements

WHEN YOUR COMMITMENT IS AT STAKE OF YOUR MATTERS

CLIENT
REWA Tollway Private Limited belongs to the well known IJM Group of companies. IJM have
their Head Office in Malaysia. IJM is engaged in construction activities in India and are located
in Hyderabad.IJM Corporation Berhad has formed its subsidiary known as REWA Tollway Pvt
Ltd. exclusively for development, construction, strengthening and widening of roads between
Rewa - Jaisingnagar - Shahdol Amarkantak Road (246 KM) and Satna - Maihar - Umaria Road
(141KM) in Madhya Pradesh. The project period is 18 Months.
INSURANCE
The above two Road projects were covered by BAJAJ ALLIANZ GENERAL INSURANCE CO.
LTD. under two different CAR Policies alongwith ALOP insurance.
WHAT HAPPENED?
In the month of September 2003, Satna in Madhya Pradesh experienced unprecedented rains.
During these unprecedented rains heavy losses were reported in Satna .This act of god had
caused the wide spread flood/inundation at various places including insured's construction site.
The rain carried over the silt and mud, contaminated the material mainly Granular Subbase (GSB), Wet Mixed Macadam (WMM), Dense Bituminuous (DBM) and SDBC laid on road
where work was in progress along with entire stretch. As a result sections of the road were
severely damaged.

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ROLE OF BAJAJ ALLIANCE

Immediately on receipt of claim intimation from brokers, a preliminary surveyor was appointed
through our Bhopal Office. Based on the preliminary survey findings and the estimates,
surveyors M/s Cunningham & Lindsey, Bombay were deputed by our Head Office for final
survey on 21/10/2003. In consultation with the insured at Hyderabad, the final surveyor visited
the site from27/10/2003 to 3/11/2003. After the first visit, series of joint meetings were held with
the Insured at Mumbai and Hyderabad. Again one more visit was made to the site by the final
surveyors for detailed inspection, along with the insured's representatives and our officials. An
initial On A/c payment for Rs. 50 lakhs was on 17/2/04to enable the insured to mobilize
resources to restart operations. In the last week of February the client finalized their estimate of
claim and on 10/03/04evaluated the repair works progress. The actual loss was assessed &
arrived at for the two projects and the claims was assessed and finalized for Rs. 6.4 crores on
10/3/04 itself. On 12/3/04
Rs. 3 crores was released based on the verbal agreement arrived on 10/03/04 and without waiting
for the final survey report. The balance amount is being paid in the following week upon
submission of the certified bills and survey reports.
LESSONS LEARNT
Be alive to the clients' aspirations and empathize with them. A disaster has occurred in an area
where the clients on-going project was located. Any delay in remobilizing resources could have
led to penalties being levied on the insured for delay in project completion arising out of their
contractual agreements. Immediate action on our part has ensured that the project gets completed
within the time frame.

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Chapter 6
AN ARTICLE ON MOTOR INSURANCE
WHY CAR INSURANCE IS A MUST
Kairav Shah in Mumbai
May

07,

2007

Insurance, suddenly, has taken centre-stage because of the increasing penchant of individuals
towards all kinds of loans. With the consumer becoming more loan-friendly, the obvious fallout
has been the requirement to stack up on insurance as well.
However, taking insurance has not been made mandatory by most banks. Of course, there is an
occasional bank that might insist (read request) you to take an insurance policy, if you are taking
a home loan. But legally, they cannot force you to take one.
But the only purchase where it is mandatory to have an insurance is in case of purchasing
automobiles. That is, it is imperative that you have car insurance as soon as you purchase your
car.
In fact, according to 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
injury or damage to property. Also, it is necessary for you to always carry the certificate of
insurance in the vehicle as proof.
There are basically two types of motor insurance policies. Type I, which is better known as Third
Party Insurance (Form A), is the one which is compulsory. This covers the policyholder against
damage to a third-party's property or the third parties themselves.
In simple words, if you were to run into another car and cause damage to that car and injure the
occupant(s) of that car, a third party only policy will pay for the repair of the other vehicle, and
will pay for any medical claims or injuries suffered by the occupant(s) of the other car and any
passengers in your car other than you.
But this policy does not cover the costs of repairing your own vehicle. However, you could add
some riders to this policy that would cover for your legal liability to pay compensation for:

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Death or bodily injury to a third-party person

Damage to third-party property

Liability is covered for an unlimited amount in respect of death or injury and damage to thirdparty property for Rs 7.5 lakhs under commercial vehicle and cars and Rs 1 lakh for scooters and
motor cycles
Moreover, there are additional riders for third-party fire and theft as well. That is, if your vehicle
is stolen or is set on fire, these riders cover them as well.
Type-II policy, better known as the comprehensive car insurance cover (Form B) covers payout
for third-party damages and injuries, will pay out in the event of your vehicle being stolen or set
on fire, and will also pay for any damage to your own vehicle (regardless of whose fault the
accident was).
In addition to the coverage under liability only, this policy covers loss or damage to the insured
vehicle and its accessories due to fire, explosion, self-ignition or lightning, burglary, riot and
strike, malicious act, terrorist act, earthquake, (fire and shock) damage, flood, typhoon,
hurricane, storm, tempest, inundation, cyclone and hailstorm, transit by road, inland waterway,
lift, elevator or air. So, this brings us to what type of car insurance cover is best for you? As a
general rule of thumb, the following points are worth noting:
If you are young and driving an inexpensive first car then you will probably find the cost of
comprehensive motor insurance very high. For instance, a 20 year-old buys a second-hand car
for Rs 1.5 lakhs. In this case, the cost of a comprehensive policy would be higher as compared to
the cost for a third-party fire and theft policy.
Of course, if there is an accident and you are at fault and your car is badly damaged, then it you
will have to pay for the repair or replacement of the car. But if you are young and driving a more
expensive car, then it will make sense for you to have comprehensive insurance.
Remember that the no-claim bonus follows the individual and not the vehicle. So you will be
able to garner good discounts on renewal of the policy. The bonus ranges from 20 per cent to 50
per cent, depending on the number of years for which no claim has been made. Some important

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exclusions under this policy include wear and tear, breakdowns, consequential loss, loss when
driving with invalid driving licence or under the influence of alcohol, use of vehicle otherwise
than in accordance with limitations as to use, etc.
Now, you can do online processing of claims and premium payments. This implies that life is
going to become much easier for the end user.
The writer is head of financial planning at Sykes & Ray Equities.

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Chapter 7

BAJAJ ALLIANZ'S MOTOR INSURANCE

Bajaj Allianz is a joint venture between Allianz AG one of the world's largest insurance
companies, and Bajaj Auto, one of the biggest 2 and 3 wheeler manufacturers in the world. Bajaj
Allianz is into both life insurance and general insurance.
Allianz Group is one of the world's leading insurers and financial services providers. Founded in
1890 in Berlin, Allianz is now present in over 70 countries with almost 174,000 employees. Bajaj
group is the largest manufacturer of two-wheelers and three-wheelers in India and one of the
largest in the world.
Today, Bajaj Allianz is one of India's leading and fastest growing insurance companies.
Currently, it has presence in more than 550 locations with over 60,000 Insurance Consultants.
MOTOR VEHICLE INSURANCE
Technology has made our daily life simpler in various ways.Motor vehicle is an invention which
has made daily commuting easy. It is convenient and fast and saves our time. Though it is easy to
own vehicle it is expensive maintaining a motor vehicle especially in case of damage caused to
your vehicle due to some unavoidable circumstances or accidents. Bajaj Allianz's Motor Vehicle
policy helps you in maintaining your vehicle in such situations.
UNIQUE FEATURE

For claim free experience, discount available on subsequent renewal.

Discount available if voluntary excess opted for

Discount available for membership with approved automobile association

Discount available for installing approved anti-theft device

Depreciation, for the parts needing replacement in the accident is defined

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ADVANTAGES

Standardized labour costs

Highest standards of service

Hassle-free inspection procedures

BENEFITS

Cashless settlement of repair claims at preferred garages.

Immediate receipt of policies

Speedy claim settlement

Highest standard of services at the preferred garages

Hassle-free documentation and inspection procedures

Quick settlement of major losses such as theft/total loss

A NEW ERA IN MOTOR INSURANCE OF BAJAJ ALLIANZ

More and more motor insurance customers understand that favorable premiums are not enough.
Bajaj Allianz offers the most comprehensive benefits system and the most valuable services in
the market.
Customers holding more than one policy with Bajaj Allianz are entitled to a free credit card
Bajaj Allianz is now offering a set of new benefits to both its existing and potential motor
insurance customers. Hungary's market-leading insurance company has a 50 percent share of
motor third party liability policies, according to the most recent half-year figures.
Bajaj Allianz offers eight new different partner benefits, plus premium discounts connected to
the method and frequency of payment. Loyalty and other benefits make the new services even
more attractive to every customer. Through the benefits, it is possible to get a premium discount
of up to 33 percent.
EASY ACCESS
The company's national network makes personal contact easy through more than 100 companyowned service units and over 900 contracted body repair shops. The company's call center and
Internet customer care facility offer a wide range of services: giving information, concluding
transactions, starting claims settlement or registering data changes.
Since Bajaj Allianz introduced its new premium system on October 30, most telephone calls and

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clicks have been about premium calculations for third party insurance. Within the first three
days, 130,000 customers received their individual quotes.

HELP AND CREDIT CARDS

Customers have also been informed about the company's brand new services: policy holders are
entitled to free assistance, a right that is not restricted to accidents. If the policy holder's vehicle
breaks down, the call center will also take his call and send assistance.
It is also a significant novelty that customers holding more than one policy are entitled to a free
credit card with the Allianz Foreign Trade Bank MKB without a separate credit rating. The deal
includes a special insurance for the goods purchased with the card. Additionally, there is a
discount of three to eight percent off the liability insurance premium.

ACTIVE CLAIMS SETTLEMENT

Active claims settlement is probably Bajaj Allianz most significant product development. While
even these days several market players only compete by offering "service-free" premiums, it is
perhaps the most important factor in the change of eras that Bajaj Allianz does not abandon its
customers and provides extras much beyond the obligatory.
The improvement benefits not only the car owner who is highly dependent on his car: 70 percent
of vehicle owners use their cars on a daily basis, as a survey conducted by Bajaj Allianz this year
shows.
Furthermore,
according
to
the
same
survey,
on
average
two more people depend on the same car.
In the case of an accident caused by somebody else, every Bajaj Allianz customer holding both
third-party and fully-comprehensive insurance with Allianz Hungria can file the accident claim
directly with Bajaj Allianz.This means it's not necessary to approach the insurance company of
the other party to get his car repaired. Furthermore, his damage-free status remains unchanged.

EUROPEAN MOBILITY PROGRAM

Active claims settlement is an integral element of the European mobility program, which Bajaj
Allianz introduced in May 2004 to enhance the service quality in the Bajaj motor insurance
market. Significant discounts introduced at that time are now coupled with additional discounts
in third party insurance and active claims settlement.

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This might give a real boost to the Bajaj vehicle insurance market and could support the Bajaj
convergence with Europe.

CONCLUSION

India is witnessing a boom in car and bike sales and it could not have come at a better
time. The burgeoning middle class and the improvement in roads and highways have only
accentuated the vehicle sales. The spill over effect of this boom has let the motor insurance
portfolio of insurance companies also on the growth highway.
Todays consumer has became more conscious about his health and wealth also they are
becoming more demanding due to awareness of insurance therefore, Motor insurance companies
are facing challenges of Best service level at the lowest price. This creates competitions between
insurance companies. However, Insurance Companies are trying to overcome the challenges by
providing 24/7 assistance to customers for all product queries and claims information.
As compared to Insurance abroad, motor insurance companies in India still have a long
way to go. Since, India is booming in car and bike sales and even with the awareness of motor
insurance in people motor insurance company is going to have a better time in future.

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RESEARCH DESIGN
DATA COLLECTION
PRIMARY DATA COLLECTION :In this chapter the focus will now shift to the choices of researchers for collecting
primary data. The researcher will opt for either quantitative research methods or qualitative
research methods or a combination of the two. For all practical purposes, usually not much about
a marketing problem is known to the researcher, so they will start with the survey method of data
collection.
This chapter will involve discussions on sampling as the basis of survey, questionnaire and
interview methods of data collection.
SURVEYS:One of the most preferred methods for collecting primary data is the survey method.
The biggest advantage of the survey method is that at a time a lot of information (or data) about a
single respondent can be obtained. And secondly the versatility of this method enables the
researcher to mould the survey method to the research objectives, in any setting - be it the
bubbling youngsters, growing teenagers, mobile youth or aging executives.
Usually, surveys are designed so as to collect variety of information on various
diverse topics and subjects. We will focus our attention on three popular method of conducting
research.

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A.

Personal interviews.

B.

Telephone interviews

A.

PERSONAL INTERVIEWS:
Generally personal interviews are classified based on the respondents to be conducted

and the means of contacting them.

During

the

personal

interview

session,

the

interviewer

and

interviewee

simultaneously interact and influence each other. The interview environment is selected based on
the type of data, which is being sought.
i. Face to face or Door to door interview:
This has traditionally been considered as the best survey method. This is because of the
various advantages involved in a face to face interaction between the interviewer and respondent
enabling:-

Immediate response or feedback from the respondent.

Facilitates clarifying doubts or facts.

Allows display of product concepts and other stimuli for evaluation.

Permits modification of questionnaire techniques depending upon the requirement.

Conducive, familiar and comfortable environment for the interviewee making the
interaction more easy and appropriate.

TELEPHONE INTERVIEW:

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A large class of consumer behavior problem can be attempted to be solved by adopting the
telephone interview method of collecting information . This is also being accepted as a popular
as a popular method especially with the cost and non-response problem of personal interview
becoming more acute .
The telephone interviewing process though quite similar to personal interview involves
certain steps in the form of :

a.

Selecting of study participants telephone numbers.

b.

Making the telephone call.

c.

Introduce and gain rapport with the target study participants.

d.

Work out and clarify the convenient time of the respondent for interview .

e.

Schedule a call report .

SECONDARY DATA COLLECTION

Secondary Method :
Secondary data means data that are already available i.e. they refer to the data which have
already been collected and analyzed by someone else. Published secondary data was used to get
an overall idea about the growth of service marketing in banking sector after globalization with
the help of source like:

Books
News papers

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Reports prepared by research scholars

Websites
Secondary research or desk research is so called because it is usually concerned with the
use of secondary data or information that is already available. This means such data have
already been collected and analyzed by someone else. Such information has not been gathered
afresh specifically for any research project. This information is inclusive of a wide range of
material Books, Magazines, and Websites, Company reports, Newspapers.

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