C S C _ V L E T R A I N I N G

the

Student Notes
Vehicle insurance (also known as auto
insurance, car insurance, or motor insurance) is insurance
purchased for cars, trucks motorcycles, scooters tractors and other
road vehicles.
Its primary use is to provide
• Financial protection against damage to the vehicle
resulting from traffic collisions
• Liability that could also arise from traffic collisions and
accident.
• Theft of the vehicle etc.
It is compulsory for all motorized vehicles to have a Motor
Insurance policy against third party liability before they can
come on road.

For purpose of insurance, motor vehicles are classified into 3

broad categories:
Commercial Vehicles
(I) Goods carrying vehicles
(II) Passenger carrying vehicles e.g.
Motor Cycles - Motorized rickshaws
Private and Motor - Taxis
cars scooters - Buses
(III) Miscellaneous Vehicles, e.g.
- Hearses (funeral van)
- Ambulances
- Publicity vans
- Mobile dispensaries etc.
 MOTOR INSURANCE CSC-VLE TRAINING

Motor Vehicles Act was passed in 1939 and amended in 1988.

Pedestrians who were knocked down by motor vehicles and who
were killed or injured did not get any compensation because the
motorists did not not have the resources to pay the compensation.
The Motor Vehicles Act, 1939, made Motor Insurance mandatory
in order to safeguard the interests of pedestrians.
The insurance of motor vehicles against damage is not made
compulsory, but the insurance of third party liability arising out of
the use of motor vehicles in public places is made compulsory.
No motor vehicle can ply in a public place without ‘THIRD PARTY
MOTOR INSURANCE’.

The liabilities, which require compulsory insurance, are as follows:

(a) Any liability incurred by the insured in respect of death or bodily injury of any person
including owner of the goods or his authorised representative carried in the carriage.
(b) Liability incurred in respect of damage to any property of a third party;
(c) Liability incurred in respect of death or bodily injury of any passenger of a public service
vehicle;
(d) Liability arising under Workmen’s Compensation Act, 1923 in
respect of death or bodily injury of:
(i) Paid driver of the vehicle;
(ii) Conductor, or ticket examiner (Public service vehicles);
(iii) Workers, carried in a goods vehicle;
(e) Liability in respect of death or bodily injury of passengers
who are carried for hire or reward or by reason of or in
pursuance of contract of employment.
The policy of insurance should cover the liability incurred in respect of any one accident as follows:
(a) In respect of death of or bodily injury to any person, the amount
of liability incurred is without limit i.e. unlimited.
(b) In respect of damage to any property of third party.

The liability in respect of death of or bodily injury to any passenger of a

public service vehicle in a public place, the amount of liability incurred
is unlimited.

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 MOTOR INSURANCE CSC-VLE TRAINING

Motor Vehicles Act specifies that the police authorities and R.T.O and other public authorities shall accept a
valid certificate of Insurance issued by the insurer as proof of Insurance.
TYPES OF POLICIES
For all classes of vehicles, there are two types of Policy Forms: -
Policy Forms
Class A
Class B
Standard Form
‘Comprehensive’ Cover
“Policy for Act Liability”.
To cover Act Liability To cover own damage + Act Liability
(l) This form applies uniformly to all classes of (a) Policies form “B” applies to Private Cars,
vehicles, whether Private Cars, Commercial Commercial Vehicles, Motor Cycles/ Scooters,
Vehicles, Motor Cycles or Motor Scooters, etc.
with suitable amendments in “Limitations as (b) The structure of the policy form is the same for
to Use”. all vehicles, (with some differences which are
pointed out, wherever applicable).
** The policy can also be extended to cover additional liabilities as provided in the Tariff.

(a) Fire, explosion, self-ignition or lightning.

(b) Burglary, house breaking or theft.
(c) Riot and strike. The insurers indemnify the insured
(d) Earthquake (fire and shock damage) against all sums which he may become
(e) Flood, hurricane, storm, inundation, cyclone, hailstorm, legally liable to any person including
frost. occupants carried in the motor car
(f) Accidental external means. (provided that they are not carried for
(g) Malicious act. hire or reward) by reason of death or
(h) Terrorist activity. bodily injuries caused to such third
(i) Transit by road, rail, inland waterway, lift, elevator or air. parties or by reason of damage to the
(j) Landslide /rockslide. property of third parties caused by or
(k) In commercial vehicle policy: Damage caused by arising out of the use of the motor car.
overloading or strain of the vehicle.

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 MOTOR INSURANCE CSC-VLE TRAINING

Third-party motor insurance premiums fixed for new financial year

A motor insurance policy consists broadly of two parts —
Third-party cover, which is regulated; and
‘own damage’ cover, the premium for which is left to market dynamics.
The premium for ‘own damage’ cover, which forms the larger chunk of the insurance premium, is
based on risk and competitive pressures.
The third-party cover, which is compulsory, covers the risk for third parties in situations like damage
caused to a person who was standing by the road and was injured or killed by an accident involving
an insured vehicle, or damage caused to a wall after a vehicle crashed into it.
The claim amount in this case can be unlimited and it is a sticky subject.

The Insurance Regulatory and Development Authority (IRDA) decides the premium that can be
charged for different types of motor vehicles using elements like cubic capacity, types of activities
being undertaken and tonnage as primary segregating tools.
Then, based on the previous year’s claim expenses and adjusting for inflation, the coming year’s
premium is decided.
Last year, the insurance regulator increased third-party motor insurance rates and it was taken to court
by an affected party.
The court upheld IRDA’s order but also ordered the regulator to declare data, which is up for
revision, and invite objections before deciding on new premiums.
So this year, it invited objections and received 67 responses from various stakeholders.
See the chart below for the new third-party insurance premiums fixed by IRDA.
The ‘Based on Calculations’ column shows the premium that would
have been applied purely based on a mathematical approach.
The ‘Final’ column displays the final rates after inviting objections
from different stakeholders.
In the private car section, you will observe the upper-middle-class
sedans subsidizing the sub 1000 cc and greater than 1500 cc cars.

Among the commercial vehicles, there seems to be heavy cross-

subsidizing.
Some sections – 12,000 kg to 20,000 kg section – are charged
substantially lower premiums than what seems ideal.
The need to increase premiums gradually or insufficient data could be
the reason for some of these adjustments.
Overall, these are steps in the right direction, with increasing risk-
based pricing being put in place and third-party premiums changing
every year.
With more accurate data collection and reporting, the pricing
mechanism will only get better and we might even see a reduction in
premiums in some categories.

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MOTOR INSURANCE CSC-VLE TRAINING

CLAIMS (OWN DAMAGE)

• The insurer should submit the details of the damage / accident etc. to the insurer.
• Policy should be in-force and the insurance covers of the vehicle should be valid.
• Insurer issues the claim form to the insured for completion and return.
• The insured is required to submit the claim form duly filled in along with a detailed estimate of repairs
from a garage.
• Independent automobile surveyors are engaged by the insurer to assess the cause and extent of loss.
• Surveyor inspects the damaged vehicle, discuss the cost of repair or replacement with the repairer,
negotiate as per the indemnity, and submit their survey report.
• The survey report is examined and settlement is effected in accordance with the recommendations
contained therein.
• The garage is instructed to keep aside the salvage of damaged parts, if there are any, for being collected
by the salvage buyer nominated by the Insurers.
• On receipt of their final bill of repairs after completion of repairs and a satisfaction note or voucher
from the insured that the vehicle has been repaired to his satisfaction, the payment to the repairer is
effected.
The following documents are hence required for processing the claim:
(1) Driving Licence (6) Claim Form from the client with garage estimate
(2) Registration Certificate Book (7) Surveyors report
(3) Fitness Certificate (Commercial Vehicles) (8) Final Bill from repairers
(4) Permit (Commercial Vehicles) (9) Satisfaction Note from the insured
(5) Police Report (F.I.R /Spot survey if T.P. loss (10) Receipt/ bill from the repairer,.
occurs) (11) Discharge voucher (full and final payment)

Total Loss Claims

• Vehicle is either beyond repairs or the repairs are not an economic proposition
• Claim is considered on a “TOTAL LOSS BASIS” - for an amount representing the market value of the
vehicle immediately prior to the loss.
• If the market value is more than the insured value, the settlement will be for the insured value.
• The Insured will be paid in cash and the Insurers will take over the salvage of the damaged vehicle,
which will thereafter be disposed.
• Insurer will collect from the client the Registration and Taxation books, ignition keys and blank TO and
T.T.0 forms duly signed by the insured.
Theft Claims
• Insured should notify the theft to the Police and the Insurance Company.
• Police authorities register a First Information Report (FIR).
• Police issues a “Non-Traceable” certificate if the vehicle could NOT be traced.
• The Insured should submit the ‘Non Traceable Certificate + R.C. Book +Taxation Certificate to the
insurer along with a Discharge Form for the Claim amount.
• The Insurer preserves in their custody the ignition keys R.C. Books etc. so that these are made readily
available if the vehicle is traced at a later date.
• The claim is settled.
RTO is informed that a total loss claim is being processed for payment in respect of the stolen vehicle
and to request them not to transfer the ownership of the vehicle to any one. This will prevent the thief
from disposing of the stolen vehicle

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MOTOR INSURANCE CSC-VLE TRAINING

THIRD PARTY CLAIMS

Section 165 of the Motor Vehicles Act 1988, empowers the State Governments to set up Motor Accident
Claims Tribunals (MACT) for adjudicating upon third party claims.
When a tribunal has been set up for an area, no civil court has any jurisdiction to entertain any claim falling
under the tribunal’s jurisdiction.
The aggrieved party has to move the tribunal within a period of six months from the date of accident.
While making the award, the tribunal has to specify the amount payable by the insurer.
The procedure for third party claims is briefly described as follows:
a) On receipt of notice of claim from the insured, or the third party or from the MACT, the matter is
entrusted to an advocate.
b) Full information relating to the accident is obtained from the insured. The various documents are
collected and these include
– Driving Licence
– Police report
– Details of driver’s prosecution, if any
– Death certificate, coroner’s (PM report) report, if any (fatal claims).
– Medical Certificate (bodily injury claims)
– Details of age, income and number of dependents etc.
c) The advocate then files a written statement on the facts of the case with the MACT.
d) Eventually, if the award is made by the MACT, the amount is paid to the third party against proper
receipt.

Lok Adalats
a) Pending cases with the MACT where the liability under the policy is not in doubt are placed before
the Lok Adalat or Lok Nyayalaya, for a voluntary and amicable settlement between the parties.
b) A copy of decision in the prescribed memo and the cheque is deposited with MACT.
c) Lok Adalat sessions are organized regularly by the insurance companies in liaison with the Legal
Aid Board of each State and MACT to effect amicable settlement of third party claims.

a) No vehicle can run on the roads without having the insurance especially third party.
b) Any claim on account of damage of the vehicle will be paid by the insurance company subject to the
assessment of loss by the independent Surveyor.
c) The court settles third party claim and the government has laid down the procedure to settle these
cases.

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 Objective
Type
Questions

1. The validity of a Motor Cover Note may be extended for a maximum period of _________.
a. two months
b. one month
c. three months
d. fortnight

2. Which of the following Statement is true?

• Statement A: Voluntary ‘excess’ under own damage section is applicable to all vehicles.
• Statement B: Compulsory ‘excess’ is applicable only to commercial vehicles.
a. Both Statements
b. Neither of the Statements
c. Only Statement A
d. Only Statement B

3. Which of the following premium rating factors does not apply to motor cycles and scooters (own
damage cover)?
a. Geographical area of operation
b. cubic capacity
c. Insured’s estimated value
d. Purchase price

4. Choose correct Statement

• Statement A: Third Party Liability premium of the State transport vehicles are part of TP Pool
• Statement B: Third Party Liability premium of the private vehicles are not part of TP Pool

a. Both Statements
b. Neither of the Statements
c. Only Statement A
d. Only Statement B

5. Sec.163 (a) of the MV Act deals with the following:

a. No Fault Liability
b. Structured compensation
c. Defences available to Insurance Company
d. Appeal to High Court.
 Objective
Type
Questions

6. Private Car policy does not cover the following use:

a. Used for social purpose
b. Reliability test
c. Used for domestic pleasure purpose
d. Carrying samples belonging to insured

7. Own damage is covered under which Section of the Package Policy?

a. Section II
b. Section III
c. Section I
d. None of these

8. Compulsory deductible is applicable to:

a. Commercial Vehicle only
b. Private cars
c. Miscellaneous vehicles
d. All the above

9. In case of double insurance with different insurers, which of the policies would be cancelled?
a. At the option of the insured
b. At the option of insurer
c. Any one policy
d. Policy commencing later

10. Geographical Zone for the purpose of rating is based upon:

a. Area of operation of the vehicle
b. Area of the insurance company
c. Location of R T O concerned
d. At the option of insured/ insurers

ANSWERS TO OBJECTIVE TYPE QUESTIONS

Q1 Q2 Q3 Q4 Q5
A A C D B
Q6 Q7 Q8 Q9 Q10
B C D D C