INTRODUCTION ON MOTOR INSURANCE

Insurance is a contract between an insurer (company) and the insured under which the insurer undertakes to compensate the insured for loss arising from the risk insured against. In consideration, the insured agrees to pay a sum called as Premium in advance. The instrument containing the contract of insurance is called as Policy. The things, property or life, which forms basis of insurance, is called as subject matter of Insurance. The Insurance ct, !"#$ was passed by the %egislature on &'th (ebruary, !"'$ and it came into force on !st )uly, !"#". It has been amended several times. It e*tends to whole of India. It is an ct to consolidate and amend the law relating to the business of insurance. +isk is there at every walk of life, also endangers life itself. In the same way all financial deals, as well as possession of money and property goods etc. are fraught with the element of risk. ll risks do not actually occur at all the times and hence, it is possible to calculate probable chances of any particular risk materiali,ing. It is -uite clear that all the people do not face risks at the same time. Thus, transfer of risk to another i.e. the insurer is in fact a pooling the risks. If insurance did not e*ist, each individual had to bear the losses on his own. Insurance, in effect means that each one in pool undertakes to bear a portion of the loss. .uch an agreement has proved to be advantageous to everyone as it is uncertain as to who will suffer the loss. Thus, in course of time, the idea developed that such a common pool of resources should be managed by e*perts who would calculate the -uantity of the contribution to be levied on each individual. In this way the idea of Insurance developed. In modern times, the insurance has come to be highly commercial undertaking however, the principle is still the same vi,., and the insurer collects premium for a large number of persons and covers them against a large variety of risks. /otor insurance is one of the largest non0life insurance of the world. This is because it is statutorily mandated in most parts of the world. ll motor vehicles are re-uired to be registered with the road transport authorities and insured for Third Party %iability. The basic premise is that the motor vehicle could either cause injury or to a subject of damage, and thus re-uire insurance.

/otor Insurance originated in 1.2. where the first motor insurance policy was introduced into 3ngland in !$"4 to cover third party liabilities. nd in !$"" the policy was e*tended to cover the accidental damage similar to what is known as comprehensive policy. In !"5#, the first company transact motor insurance was 6ar 7 8eneral Insurance 6orporation. fter 9orld 9ar I, there was a considerable increase of motor vehicles in all the countries and an increase in road accidents. This position warranted compulsory Third Party %iability insurance in 3ngland through +oad Traffic ct, !"#5 7 !"#4 which were subse-uently consolidated by +oad Traffic ct, !"'5. In India the /otor :ehicles ct was passed in !"#" and in !"4' the third party insurance was introduced compulsorily. The need for compulsory motor insurance is obvious. There has been a phenomenal rise in the motor accidents in the last 40; years. /uch of these are attributable to a sudden spurt in the number of vehicles. 3very vehicle before being driven on roads has to be compulsorily insured. The automobile insurance policy represents a combined coverage of the vehicles including accessories, loss or damage to his property or life and the third party cover. The /otor :ehicle ct, !"#" introduced compulsory insurance to take care of those who may get injured in an accident. The insurance for own vehicle damage is not mandatory. In India the Tariffs dvisory 6ommittee regulates this business MEANING /otor Insurance includes Private 6ars, /otori,ed Two 9heelers and 6ommercial :ehicles e*cluding vehicles running on rails. DEFINITIONS /otor insurance is also mandatory by the law. It is a legal re-uirement in India to have insured a minimal level of insurance protection before driving any motor vehicle. normal motor insurance policy provides coverages for the following damages< THERE ARE TWO TYPES OF MOTOR INSURANCE

 %iability =nly policy Package policy The %iability only policy is mandatory insurance re-uirement as per the Indian /otor :ehicle ct !"$$. This policy insures the liability of the owner of the vehicle against the Third Party. The Package policy covers the damage to the vehicle apart from the mandatory liability insurance. BENEFITS OF MOTOR INSURANCE The motorbike insurance industry now has the use of a /otor Insurance >atabase? this holds information of all motor insurance policies including cars, motorbikes, vans, and %orries. In addition, records of your vehicles /=T and +oad Ta* are also kept on databases. These are all accessible by the police, to determine whether a vehicle is legally fit to be on the road. These databases were created to catch uninsured vehicles on the road, in addition to vehicles that are either unta*ed or without a /=T certificate. 1ninsured drivers alone cost the government on average around #$5 million pounds according to the >irect 8ov website. This money is added to our motorbike insurance policies, and costs the honest motorist on average #5 pounds per policy according to the >irect 8ov website. This is called IPT (Insurance Premium Ta*) costing you five percent of your insurance premium. The database also holds information of whether you have an insurance policy on another vehicle, which entitles you to drive any other vehicle, in the event you are driving a friends vehicle. The combination of the insurance and /=T databases, enable us to buy our road ta* online, making the whole process much easier, and does not cost us any more money. This is provided that your

insurance and /=T information has been stored on the database correctly. /otorbike insurance companies check their information against the database on a regular basis, keeping it both up to date and correct. If a customer of bike insurance has for e*ample provided an incorrect registration number, this will be picked up by the checks in a matter of days. The client is then contacted to rectify this error, some of the time it may be that the vehicle has been sold, and the insurance policy has not been cancelled. /any vehicles that are sold do not have their insurance policies cancelled. 9hen the new rider or driver then tries to insure the vehicle, this can cause complications, as a vehicle cannot be insured twice. @ou must always cancel an insurance policy on a vehicle you no longer own, as this can also cause complication for you if the vehicle is involved in an accident. /otorbike insurance companies have the responsibility to keep the database as up to date as humanly possible, meaning that if any information is delayed over a set time, the insurance company can face fines for this. This is why the insurers re-uire certain paperwork from customers to be returned within a certain time, and if this is not received, they can invoke cancellation procedures. Aowever, there can be delays of a few days before your information appears on the database. The information is transmitted overnight from the insurance companies to the database. .o do not e*pect to ta* your vehicle the same day as insuring it, whether you have insured it over the phone, or online. The police have the ability to scan vehicle registration number plates, and check the database for insurance, ta*, and /=T in a

matter of seconds. If your vehicle is found uninsured, the police have the power to sei,e your vehicle, with the possibility of destroying it in the event no one with valid insurance claims it. This will enable them to crack down on vehicles that are not fit to be on the road. LIMITATIONS OF MOTOR INSURANCE
6omprehensive coverage is costlier than the third party cover and

varies with each insurer. The customer has to do a little bit of research online before taking a comprehensive cover to figure out which company will be cheaper. The regulatory authority has given the liberty to the insurers to charge the premiums in this case based on their underwriting e*perience and risk assessment. BASIC TERMINOLOGIES IN MOTOR INSURANCE DRIVERS CLAUSE ny person including the insured Provided that a person driving holds an effective driving license at the time of the accident and is not dis-ualified from holding or obtaining such a license. Provided also that the person holding an effective %earnerBs license may also drive the vehicle and that such a person satisfies the re-uirements of +ule # of the 6entral /otor :ehicles +ules, !"$". LIMITATION AS TO THE USE CLAUSE FOR THE PRIVATE CAR The Policy covers use of the vehicle for any purpose other than Aire or +eward 6arriage of goods (other than samples or personal luggage) c) =rgani,ed racing Pace making .peed testing +eliability Trials

 1ses in connection with /otor Trade .imilarly there are different wordings for different class of the vehicle. I/T 3ndorsements There are '; endorsements signifying the benefits and the limitations of every e*tensions or deletions made under the policy and they actually define the coverage under the endorsements.

HISTORY OF MOTOR INSURANCE

If we see in real life we can say that /otor Insurance is an important part of 8eneral Insurance? it is the fascinating branch of insurance. This type of insurance has come into e*istence from 1nited 2ingdom in the early part of this century. s you must be surprised to know that the first /otorcar was introduced in 3ngland in !$"4. The first motor policy to provide coverage for third party liability was came into e*istence in !$";. Third party liability includes third party and liability incurred towards third party. Third Party means any party other then owner Cdriver 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. .o at the beginning, only third party insurance came into e*istence but later on, in 1.2 they reali,ed the importance of insurance in terms of motor and with this an accidental comprehensive policy also came into e*istence and later on the lines of 1.2. we started using appro* the same policy. In !"5# the 6ar and 8eneral Insurance 6orporation limited was established mainly to transact motor insurance, after this company a lot many other companies has come into e*istence to transact this business. It has been reali,ed that after 9orld 9ar 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. s the concept of insurance was not that much in e*istence 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. fter reali,ing this introduction of compulsory third party insurance through the passing of the +oad Traffic cts !"#5 and !"#4 was done. %ater on these cts have been consolidated by the +oad Traffic ct !"'5.

HOW THE CONCEPT OF MOTOR INSURANCE HAS COME INTO EXISTENCE? In !"#", India has also reali,ed the importance of /otor Insurance and /otor :ehicle ct was passed and came into e*istence in !"#". 3arlier, only few people knew about motor insurance but later on compulsory third party insurance was introduced by the ct on !st )uly !"4'. 9e in India follow the same practice as that of 1.2.. s /otor :ehicles ct laid the provisions in !"#" and it re-uired some amendments that were implemented by the /otor :ehicles ct !"$$ and it became effective from ! st )uly !"$" and thatBs how the insurance concept has come to India. WHY ONE SHOULD GO FOR MOTOR INSURANCE? s 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. Dut the -uestion arises how the loss is to be compensatedE fter reali,ing 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 e*istence and ct made this insurance compulsory for everyone those who are driving the vehicle on the road so it become -uite popular among people and than motor insurance policies become available to provide a comprehensive cover and a third party liability cover.

Principle In #r$nce

!" In #r$nce % i&

Rele'$nce (i&) M!&!r

1tmost 8ood (aith

 Insurable Interest Principal of Indemnity Pro*imate cause *+ U&,! & G!!- F$i&). 6ontract of insurance have all essential elements of nature of general contract. ccording to section &(h) and section (!5) of Indian 6ontract ct, the valid contract must have the essential element of offer and acceptance, considerations, legal parties, sound mind and free consent of the parties. %ike every other contract the insurance 6ontract is the sort of contract it is approved by the Indian 6ontract ct. 6ontract of insurance comes in to an e*istence where there is an offer and the underwriter or proposal of one side and the insurer accepts it by issuing the policy. It has to satisfy all the essential elements of a simple contract. The contract of insurance must be entering into contract by the competent person in order to be a valid contract. The competent person may be who is the age of majority according to law and who is of sound mind. Premium is the age consideration that must be given for starting the insurance contract. The object of the contract should be lawful. 3very person entering into an insurance contract should enter into by their free consent. 6ontracts of motor insurance are governed by the doctrine of utmost good faith. It is one of the important principles of that implies to the contract of insurance It refers that both the parties involved in insurance contract should make the disclosure of all material facts and figures relating to the subject matter of the insurance contract. If either party does not disclose the utmost good faith the other party may avoid the contract. The

insuredBs duty to disclose all material facts known to him but unknown to the insurer. .imilarly the insuredBs duty of utmost good faith is disclosing the scope of insurance at the time of contract. ny concealment, misrepresentation, fraud or mistake concerning the material facts to the risk should be disclosed. Fo important material facts and figures must be concealed. Thus, responsibility of disclosure of both parties should be a reciprocal duty i.e. disclosure is absolute and positive. .ome of the few e*amples of disclosure of material facts such as< %ife insurance< etc. (ire insurance< Inflammable materials, nature and its uses, fire detection etc. /otor Insurance< Type of car, value and details of driver, the driving history and traffic convictions of the driver, past loss e*perience, etc i.e. which vehicle he is using, in which area he will be driving the vehicle i.e. hilly area or plain area, how good is the driver at driving the vehicle which can be known by his past record. loss has to be informed to the insurer. In the conte*t of the principle of utmost good faith, it is pertinent to note the provisions of .ection !4" of the /otor :ehicles ct !"$$. This section provides that< it is compulsory to take the insurance policy if a vehicle is plying on the road and if a certificate of insurance is being issued then insurer can not cancel or avoid a third party liability under this policy In other words It means that any one who is driving a vehicle on the road can not drive the vehicle without an insurance policy it may be a comprehensive policy or only a third party liability policy. /+ In #r$0le In&ere &. Insurable Interest means the insured must have some legal right to insure the subject matter. Insurable interest is an important and fundamental principle of insurance. Thus it is necessary for ny past e*perience related to ge, income, education, occupation, health, family si,e,

valid contract of insurance.

ccording to the definition of insurable

interest in the event of the legal right to insure arising out of a financial relationship should be recogni,ed under the law between the insured and the subject matter of insurance. It means that insurable interest must be a pecuniary interest. The insured must have an insurable interest in the subject matter of insurance. 9ithout insurable interest the contract of insurance is void and unenforceable. person said to have an insurable interest in the subject matter has to have benefit from its e*istence and prejudice by its destruction. Thus, insurable interest must be actual and real and not arising out of mere e*pectation. (or e.g. if I own a car I can take a insurance policy on my name but if my friend own a car then can I take a policy on my nameE The answer is GFoB as we donBt have any right on otherBs property and no profit or loss will occur to me if a claim arises to this vehicle. The essentials of insurable interest are<0 i) The e*istence of property e*posed to loss, damage or a potential liability? ii) .uch property or liability must be the subject matter of insurance? iii) The insured must bear a legal relationship to the subject matter whereby he stands to benefit by the safety of the property, right, interest or freedom from liability and stands to lose by and loss, damage, injury or creation of liability. In motor insurance, the vehicle is the property, which is e*posed to loss or damage. The insured also has a legal liability towards third parties? he may suffer financial loss if he insures that liability through third party caused y negligent use of the vehicle. Therefore, the insured has insurable

interest, which entitles him to insure the vehicle against damage and liability risk. (urther, under .ection !4' of the /.:. ct !"$$, no person shall allow any other person to use a vehicle in a public place unless the vehicle is covered by an insurance policy complying with the re-uirements of the ct. If a vehicle is purchased under a hire purchase clause included in the policy to agreement, the finance company has an insurable interest in the vehicle until all the installments are repaid. protect the financierBs interest. This clause provides that in respect of loss or damage to the motor vehicle (which loss or damage is not made good by repair or replacement) the monies shall be payable to the owners, i.e. the financiers. 1+ Princip$l !" In-e,ni&2. Indemnity means to indemnify the loss or to put the insured back in same position as he was before the loss. The word HindemnityI implies that protection, security against damage or loss of security against legal responsibility. ccording to this principle the assured in the case of loss against the policy made shall be fully indemnified. Indemnity is one of the fundamental principles that e*cept life insurance, personal accident insurance, other contracts of insurance such as fire, marine and accident insurance are contracts of indemnity. There are two corollaries to indemnity, they are< !) .ubrogation and &) 6ontribution.

The term GS#0r!3$&i!n4 means transfer of all the rights and remedies available to the insured in respect of subject matter to the insured after indemnity has been affected. It is also referred as getting into the shoes of the others. It implies that the substitution of the insurer in place of the insured in respect of the latterBs of .ubrogation. (or e.g. If a vehicle has collided with another vehicle then the loss occurred to vehicle can be claimed from insurer but if it is due to other party and loss has occurred then it will come from other party, which means insurer may give the claim to you but they can get the amount of loss from the other party. This principle holds good only in the case of motor, fire 7 marine insurance. C!n&ri0#&i!n in simple words means to contribute the amount. This is the one important principle essential for valid insurance contract. This doctrine of contribution also applies only to contracts of indemnity i.e., to fire and marine insurance. ccording to this principle, the case of double insurance, the insurers are to share the loss in proportion to the amount assured by each of them. In order to apply the right to contribution between two or more companies the following factors must e*ist< !(a) The subject matter of insurance must be the same &(b) The event insured must be the same #(c) The insured must be the same. (or e.g. If a car is insured by two insurers for +s. !55,555 from insurer &55,555 from insurer D. proportion from both the insurerBs i.e. +s &;,555 from insurer and for +s.

loss occurs for J;,555 then the claim will come in and +s. ;5,555 from

insurer D. It does not mean that if loss occurs and if a person has double insurance then he can claim the whole amount from both the insurers, this way he can make profit out of these contracts. .o for this purpose this contribution corollary has come into e*istence as insurance contracts are the contracts of indemnity and no body has to make profit out of it. 5+ Pr!6i,$&e c$# e. it means the actual cause of the loss due to which a loss has occurred. 6ausa Pro*ima is necessary for a valid contract of insurance. It has been

defined as HThe active efficient cause of that sets in motion a train of events which brings about a result, without the intervention of any force started and working actively from a new and independent sourceI. The doctrine of pro*imate cause applies to motor insurance as to other classes of insurance. The loss or damage to the vehicle is indemnified only if it is pro*imately caused by on of the insured perils. Insured perils means the perils covered by insurer under the policy. The doctrine also applies to third party claims. The third party injury or damage must be pro*imately caused by the negligence of the insured for which he is held legally liable to pay damages.

M!&!r Ve)icle Ac&

T)e M!&!r 'e)icle Ac& *717. /otor :ehicles ct in actual sense came into e*istence in !"#". If we see the

provisions of this we will reali,e that it provides for various matters relating to the use, maintenance and operation of motor vehicles. Desides this it also take into consideration the matters relating to licensing of drivers of motor vehicles, registration of motor vehicles, construction e-uipment and maintenance of motor vehicles, control of traffic etc. 1nder this ct 6hapter :II0 and 6hapter :III of the ct provides for insurance of motor vehicles against third party risks. It was long time back in !"#", when this /otor :ehicles ct has come into e*istence

and properly came in force on !st )uly !"#". Dut this did not include all the provisions where as 6hapter :III was brought in force on !st )uly !"4'. The /otor :ehicle ct, !"#" (Fo. 4 of !"#") consolidated and amended the law

relating to motor vehicles. This was amended a several times to keep it up to date. need was, however, felt that this law should now take into account also the changes in the road transport technology, pattern of passenger and freight movements, development of road network and particularly the improved techni-ues in motor

vehicles management. :arious 6ommittees like the Fational Transport policy committee, national Police 6ommission, +oad .afety committee, %ow powered Two0 wheelers 6ommittee, as also the law commission went into the different aspects of road transport. They recommended updating, simplification and rationali,ation of this law. Therefore a working group was constituted in )anuary !"$4 to review the provisions of the /otor :ehicles ct, !"#" and to submit draft proposals for suitable legislation to replace the e*isting ct. In !"$; 8eneral Insurance 6orporation has appointed a 6ommittee of e*perts, which e*amined the provisions of the !"#" ct thoroughly and submitted to the 6entral ct. It 8overnment an e*haustive report suggesting constructive amendments to the

has recommended removal of certain disparities with regard to the liability of the insurer to pay compensation depending upon the class or type of vehicle involved in the accident T)e M!&!r Ve)icle Ac&8 *799. The /otor :ehicles ct, !"$$ ( ct Fo. ;" of !"$$) is the outcome of the

recommendations proposed by various 6ommittees. It has replaced the earlier !"#" ct and it became effective from !st )uly !"$". .ome of the more important provisions of the ct provide for the following matters< a) +ationali,ation of certain definitions with additions of certain new

definitions of new types of vehicles. b) .tricter procedures for grant of driving license and period of their validity. c) %aying down of standards for the components and parts of motor vehicles. d) .tandards for anti0pollution control devices.

e) Provisions for issuing fitness certificates of vehicles also by the authori,ed testing stations. f) 3nabling provision for updating the system of registration marks. g) %iberali,ed schemes for grant of for goods carriages. h) dministration of .olarium (und by 8eneral Insurance 6orporation. i) /aintenance of .tate registers for driving licenses and vehicle registration. j) 6onstitution of +oad .afety 6ouncils. k) .eeking to provide for more deterrent punishment in cases of certain offences. RE:UIREMENT OF POLICIES The policy is re-uired to be issued by an Gauthori,ed insurerB, i.e., an insurer in whose case the re-uirements of the Insurance ct, !"#$, are complied with. .ection !4J of the /otor :ehicles ct, !"#$ re-uires that the policy of insurance must provide cover gainst any liability which may be incurred by the insured with respect to death of or body injury to any person, including the owner of the goods or his authori,ed representative carried in the carriage, or gainst damage to any property of third0party? or gainst death or body injury to any passenger of a public service vehicle, caused by or arising out of the use of the vehicle in a public place. ll0India Tourist permits as also national permits

THE POLICY8 HOWEVER8 SHALL NOT BE RE:UIRED TO COVER ny contractual liability? or ny liability with respect to death arising out of and in the course of employment of the employee of the insured, or with respect to body injury sustained by such employee arising out of and in the course of his employment. The policy must, however, cover liability arising under the 9orkmenBs 6ompensation ct, !"&# with respect to death or body injury to any such employee

$+ 3ngaged in driving the vehicle, or 0+ 3ngaged as conductor or ticket e*aminer in a public service vehicle, c+ Deing carried in the vehicle, if it is a goods carriage.

TRANSFER OF CERTIFICATE OF INSURANCE 1nder .ection !5#0 of the !"" ct, insurance companies had a choice of refusal to transfer the certificate of insurance and issuing of new policy in the name of the new owner, if the driving history and other features of the risk become undesirable and adverse. This right of refusal has been taken away in terms of the provisions of .ection !;J of the new ct (!"<#$). This section lays down that, where a person in whose favor a certificate of ins insurance has been issued, transfers to another person the ownership of the motor vehicle with respect to which the insurance was taken, then the certificate of insurance end the relative policy shall be automatically deemed to be transferred in favour of the new owner from the date of transfer of ownership of the vehicle. The transferee should apply within !4 days from the date of transfer on the prescribed form to the insurer, for making the necessary changes in the certificate of insurance and in the policy, and the insurer is obliged to make such changes in the said documents to effect title transfer of insurance. The /otor :ehicles ( mendment) ct, !""4 added an e*planation in .ection !;J (!) stating that such transfer shall include transfer of rights and liabilities of he said certificate of insurance and policy of insurance. The provisions of the .ection are thus applicable not on!y in case of third risks but also to own damage risks. DUTY OF INSURERS TO SATISFY ;UDGMENTS .ection !4" of /otor :ehicles ct, !"$$ provides that Glf, a certificate of insurance complying with compulsory insurance provisions of the ct has been issued and

judgment with respect to compulsory third0party liability is obtained against an insured person, then the insurer has to pay to the third party the amount decreed plus costs and interest awarded, subject to the sum insured under the policyI. The important point to be noted here is that the insurers have to pay the third parties, even though they may be entitled to avoid or cancel the policy or may have avoided or cancelled the policy. Aowever this section provides certain rights to the insurers before the commencement of the proceedings the insurers are entitled to receive notice through the court or the claims tribunals, as the case may be, of the bringing of the proceedings or with respect to any judgment awarded so long as e*ecution is stayed thereon pending an appeal. THE MOTOR VEHICLES ACT8 *799 The /otor :ehicles ct, !"$$ ( ct Fo. ;" of !"$$) is the outcome of the recommendations proposed by various 6ommittees. It has replaced the earlier !"#" ct and it became effective from !st )uly !"$". .ome of the more important provisions of the ct provide for the following matters< 0 +ationali,ation of certain definitions with additions of certain new definitions of new types of vehicles. .tricter procedures for grant of driving license and period of their validity. %aying down of standards for the components and parts of motor vehicles. .tandards for anti0pollution control devices. Provisions for issuing fitness certificates of vehicles also by the authori,ed testing stations. 3nabling provision for updating the system of registration marks. %iberali,ed schemes for grant of ll0India Tourist permits as also national permits for goods carriages. dministration of .olarium (und by 8eneral Insurance 6orporation. /aintenance of .tate registers for driving licenses and vehicle registration. 6onstitution of +oad .afety 6ouncils. .eeking to provide for more deterrent punishment in cases of certain offences.

N! F$#l& Li$0ili&2.

.ection !45(!) of /otor :ehicles ct, !"$$ provides as follows< H9here the death or permanent disablement of any person has resulted from an accident arising out of the use of a motor vehicle, the owner of the vehicle shall, or, as the case may be, the owners of the vehicle shall, jointly and severally, be liable to pay compensation n the respect of such death or disablement in accordance wit the provisions of this section. The material change in the law is that the negligence of the owner of the owner or ser of the motor vehicle is no longer relevant to decide the -uestion of liability. In fact section !45 (#) specifically provides when the claimants shall not be re-uires to plead and establish that the death or permanent disablement in respect of which the claim has been made due to any wrongful act, neglect or default of the owner, owners, of the vehicle, or vehicles concerned or any other person. This concept is known as Fo (ault %iability. Aowever the amount of compensation payable is restricted to +s.;5, 555C0 in the case of death and +s.&;, 555C0in the case of permanent disablement to motor vehicle act !"$$. 3arlier, it was +s. &;,555C0 for death and +s. !&,555C0for permanent disablement. Permanent disablement is defined as any injury or injuries involving? (a) Permanent privation of the sight of either eye or the hearing either ear, or privation of any member or joint? or (b) >estruction or permanent impairing of the powers of any member on joint (c) Permanent disfiguration of the head or face. Hi& $n- R#n Acci-en& .

Ait and run accident is Han accident arising out of the use of a motor vehicle or motor vehicles the identity whereof cannot be ascertained in spite of reasonable efforts for the purpose.I .ection !'# provides that the central government may establish in fund known as .olatium (und to be utili,ed for paying compensation in respect of death or grievous hurt to persons resulting from Ait and +un /otor accidents. It is provided that grievous hurt shall have the same meaning as in the Indian Penal 6ode. ccording to section #&5 of the Indian Penal 6ode the following kinds of hurts are designed as grievous< Permanent Privation of the vision of either eye. Permanent Privation of the hearing of either ear. Privation of any member or joint. Permanent disfiguration of the head or face. (racture or dislocation of a bone or tooth. ny hurt which endangers life or which causes the sufferer to be during the space of twenty days in severe bodily pain or unable to follow his ordinary pursuits. The compensation payable form death claims is fi*ed at +s. &;,555C0 and in respect of Ggrievous hurtB +s.!&, ;55C0after the amendment to /otor :ehicles ct !"$$. (3arlier to amendment, it was +s.$;55C0 for death and +s. &,555C0for grievous hurt. The payment of compensation for Ait and +un ccidents is subject to the condition

that if any compensation is awarded for such death or grievous hurt under any other provisions of the /otor :ehicles ct or any other law under Ait and +un ccident has to be deduced from such compensation.

S!l$&i#, "#n-. It is the fund, which is, consists of contributions from the 8eneral Insurance Industry, the 6entral government, and the .tate 8overnment as decided by the 6entral government. solatium fund is created so as to provide compensation for the victims of hit 7 run cases. @ou must have seen a lot of accidents on road where a vehicle had hit the other vehicle or peddlers on the road, so for them this solatium fund is created to provide them compensation.

T2pe !" M!&!r Ve)icle

De"ini&i!n !" M!&!r Ve)icle. In simple words we can say a motor vehicle is that which runs with a motor, but in technical sense we can define a H/otor :ehicleI as under .ection & (&$) of the /.:. ct !"$$ as any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted thereto from an e*ternal source and includes a chassis to which a body has not been attached and a trailer? but does not include a vehicle running upon fi*ed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises or a vehicle having less than four wheels fitted with engine capacity of not e*ceeding &; cubic centimeters. T2pe !" M!&!r Ve)icle r#nnin3 !n &)e r!$-. There are various motor vehicles plying on the road but for the purposes of insurance, the Indian /otor Tariff, which governs the /otor Insurance business in India, and revised with effect from !st )uly &55&, classifies the motor vehicles broadly in # categories< Private 6ars, /otori,ed Two 9heelers nd 6ommercial :ehicles.

*+ Pri'$&e C$r . These are< a) Private 6ar type vehicles are used for social, domestic and pleasure purposes and sometimes for professional purposes of the insured or used by the insuredBs employees for such purpose It e*cludes use for hire or reward, racing, pace making, reliability trial, speed testing and sue for any purpose in connection with the motor Trade. It also e*cludes carriage of goods other than samples. b) /otori,ed three wheeled vehicles (including motori,ed rickshawsC cabin body scooters) are used for private purpose only. Trial, speed testing and used for any purpose in connection with the /otor Trade is e*cluded. c) Three 9heeled vehicles, which also includes motori,ed rickshaw cabin scooters used for private purposes. /+ T(! ()eeler . /otori,ed two wheelers can be with or without sidecar, which is used for social, domestic and pleasure purposes and also for professional purposes. It e*cludes carriage of goods other than samples of the insured or used by the insuredBs employees for such purposes but e*cluding use for hire or reward, racing, pace making, reliability trial, speed testing etc. 1+ C!,,erci$l Ve)icle . $+ G!!- c$rr2in3 'e)icle <!(n 3!!- +. They are trucks and trolleys which carry goods for their own purposes or for their private use. These are vehicles used under a Private 6arrierBs permit within the meaning of the /otor :ehicles ct !"#". The ct defines a Hprivate carrierI as Han owner of a transport vehicle other than a public carrier who uses the vehicle solely for the carriage of goods which are his property or

the carriage of goods which belong to him and is necessary for the purpose of business to carry the goods and not being a business of providing transportI. (or e.g. I own K6 6o. %td at >elhi and I have to send my own goods to my manufacturing unit at /eerut so for this purpose if I use my own truck to carry my own goods, it means this vehicle is under the category of Private carrier vehicle.

0+ G!!- c$rr2in3 'e)icle <Gener$l C$r&$3e+. These are vehicles used under a Public 6arrierBs permit within the meaning of the /otor :ehicles ct !"#". The ct defines a Gpublic carrierB as Han owner of a transport vehicle who transports or undertakes to transport goods or any class of goods, for another person at any time and in any public place for hire or reward, whether in pursuance of the terms of a contract or agreement or otherwise.I 9hen the /otor :ehicles ct (of !"$$) was amended it did not have this category, all goods carrying vehicles are called H8oods 6arriageI and they did not categories them into Public carrier and Private carrier. /otor Tariff 6ategori,ed the 8oods 6arrying :ehicle as G=wn 8oods 6arrierB and G8eneral 6artage 6arrierB separately for rating purpose. Dut this was not the right way to charge premium, as people who were using it for personal use and people those who were using it for business purposes were paying the same premium. fter reali,ing this, when the tariff was revised in !.J.&55&, T. .6. renamed as Public carrier and Private carrier for rating purpose.

INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY

I+> is formed as an authority to protect the interests of holders of insurance policies, to regulate, promote and ensure orderly growth of the insurance industry. Wi&) &)e In #r$nce Re3#l$&!r2 $n- De'el!p,en& Ac&8 &)e "!c#

)i"&e- &! &)e

The Insurance +egulatory and >evelopment uthority (I+> ) should give priority to health insurance while issuing certificates of registration

PolicyholderBs funds will be invested in the social sector and infrastructure. The percentage may be specified by the I+> and such regulations will apply to all insurers operating in the country? Insurers will be e*pected to undertake a certain percentage of business in the rural or social sector and provide policies to persons residing in rural areas, workers in the unorgani,ed and informal economically back? In case the insurers fail to meet the social sector obligation a fine of +s.&.; mn would be imposed the first time. .ubse-uent failures would result in cancellation of %icenses.

DUTIES8 POWERS AND FUNCTIONS OF IRDA The following are the powers and the functions of the I+> are as follows The IRDA issues, modifies, renews, suspends, withdraws and cancels all certificate of registration for all parties that apply. They are also responsible for the protection of the interests of the holders in matters concerning assigning of policy, nomination by policy holders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance. It also specifies the code of conduct for surveyors and loss assessors. The IRDA specifies requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents. The IRDA has been given the responsibility of promoting efficiency in the conduct of insurance business. It is in charge of promoting and regulating professional organisations connected with the insurance and re-insurance business

 It has been entrusted with the control of the Insurance sector by calling for information from, underta!ing inspection of, conducting inquires and investigations including audit of the insurers, intermediaries, insurance intermediaries and other organisations connected with the insurance business It will also be responsible for the control and regulation of the rates, advantages, terms and conditions that may be offered by insurers. The IRDA will specify the form and manner in which boo!s of account shall be maintained and statement of accounts shall be rendered by insurers and other insurance intermediaries. "ne of the most important functions is that of regulating investment of funds by insurance companies and the maintenance of margin of solvency. The other function is that of ad#udication of disputes between insurers and intermediaries or insurance intermediaries. ROLE & FUNCTIONS OF IRDA .ection !4 of I+> IRDA= ct, !""" l$2 -!(n &)e -#&ie 8 p!(er $n- "#nc&i!n !"

*+ .ubject to the provisions of this

ct and any other law for the time being in force, the uthority shall have the duty to regulate, promote and ensure orderly growth of the insurance business and re0insurance business.

/+ 9ithout prejudice to the generality of the provisions contained in sub0section (!),

the powers and functions of the uthority shall include,

$+ Issue to the applicant a certificate of registration, renews, modify, withdraw,

suspend or cancel such registration

0+ Protection of the interests of the policy holders in matters concerning assigning

of policy, nomination by policy holders, insurable interest, settlement of

insurance claim, surrender value of policy and other terms and conditions of contracts of insurance
c+ .pecifying re-uisite -ualifications, code of conduct and practical training for

intermediary or insurance intermediaries and agents

-+ .pecifying the code of conduct for surveyors and loss assessors e+ Promoting efficiency in the conduct of insurance business "+ Promoting and regulating professional organi,ations connected with the

insurance and re0insurance business

3+ %evying fees and other charges for carrying out the purposes of this

ct

)+ 6alling for information from, undertaking inspection of, conducting en-uiries

and investigations including audit of the insurers, intermediaries, insurance intermediaries and other organi,ations connected with the insurance business?
i+ 6ontrol and regulation of the rates, advantages, terms and conditions that may

be offered by insurers in respect of general insurance business not so controlled and regulated by the Tariff dvisory 6ommittee under section '41 of the Insurance ct, !"#$ (4 of !"#$)
>+ .pecifying the form and manner in which books of account shall be maintained

and statement of accounts shall be rendered by insurers and other insurance intermediaries
?+ +egulating investment of funds by insurance companies? l+ +egulating maintenance of margin of solvency? ,+

djudication of disputes between insurers and intermediaries or insurance intermediaries dvisory 6ommittee

n+ .upervising the functioning of the Tariff

!+ .pecifying the percentage of premium income of the insurer to finance schemes

for promoting and regulating professional organi,ations referred to in clause (f)

p+ .pecifying the percentage of life insurance business and general insurance

business to be undertaken by the insurer in the rural or social sector

@+ 3*ercising such other powers as may be prescribed.

IRDA RELEASES DECLINED POOL

NEW

GUIDELINES

FOR

MOTOR

INSURANCE

I+> wide its circular has created a >eclined +isk Pool for :ehicle Third Party Insurance with affect from !.4.&5!&.

ct =nly 6ommercial

T)e "r$,e(!r? "!r In-i$n ,!&!r &)ir- p$r&2 -ecline- ri ? in #r$nce p!!l "!r c!,,erci$l 'e)icle $re $ 0el!(.A The purpose of creating the Indian /otor Third Party >eclined +isk Insurance Pool for commercial vehicles is to have e-uitable and fair sharing by all insurers, simplicity to administer and to bring claims management efficiency. The declined risk pool shall apply to commercial vehicles for standalone third party insurance (act only insurance) . Fo comprehensive motor insurance policy or part thereof shall be ceded to the pool. /iscellaneous and special class of vehicles falling underclass code &# of the all India motor tariff shall also be e*cluded from the scope of the pool. ll e*isting general insurers shall be admitted as a member of the new pool.

.pecialist insurer not licensed for the motor insurance business shall not be members of the declined risk pool.

 The sessions to general insurance 6orp shall be in accordance with the obligatory cessions which currently stand at !5L. 8eneral insurance 6orp shall act as administrator of the declined risk pool. I+> has defined the role and responsibilities of declined risk pool administrator and insurer. The premium in the pool shall be reviewed annually based on formula notified by the authority in its order dated !; pril &5!!. The premium for declined risk pool shall be determined in accordance with the actuarial principles which shall be used by all insurers and shall be notified by the authority from time to time. n agency commission our brokerage not more than !L shall be paid for third party motor insurance commercial vehicles.

Fo ceding commission in respect of the business ceded to the declined risk pool shall be paid. 8I6 as administrator shall be paid a fee on actual cost basis. ny general insurance not willing to write the third party insurance shall refer to the declined risk pool.

Fo insurer can refuse to write the risk. I+> pool has defined the parameters for ceding the proposals to the declined risk

Premium for motor third party insurance or commercial vehicle shall be same whether underwritten to its net account or ceded to the declined risk pool. I+> has also specified the manner of calculating the obligations.

 3very general insurance shall appoint a 8rievance +edressal officer to look into grievance of policyholder in respect of non0availability of motor third party insurance

DOCUMENTS RELATED WITH MOTOR INSURANCE

PROPOSAL FORM The proposal form is the basis of insurance. It is so desired as to elicit all information necessary for a proper evaluation of the risk and for rating. .pecimen of the proposal forms are given in .ection ; of the Tariff. The -ueries madeCdetails stated in the Proposal form are the minimum re-uirements to be furnished by a proposer. The insurer may seek any other information as desired for underwriting purposes. THE :UESTIONS COMMONLY ASBED ARE.A Particulars about the proposer ProposerBs name in full to establish the identify of the insured who is one of the parties of the contract, and may place the insurer on en-uiry concerning the moral ha,ard. ddress< The proposerBs address is necessary for communication and is a cross checks on the area of use of the vehicle

=ccupation< The answer to this -uestion is important for underwriting private car and commercial vehicle risk and has an important bearing on the moral ha,ard. The answer is fair indication of the social status of the proposer and it will provide some indication of the e*0tent and for what purpose the vehicle is likely to be used. Physical disability and mental infirmity0 The answer to these -uestions are important, but it is difficult to get precise answers particularly in respect of persons other than the insured who may drive the car. Previous convictions< record of convictions for driving offences re-uires close investigations. The en-uiry is generally limited to a period of five years.

 +egistration letters and number M (or identification of the vehicles. (/ake of the vehicle M 3ngine and 6hassis numbers M These are re-uired for verification in case of accident. @ear of manufacture 0 This is necessary because some insurers do not give comprehensive cover for vehicles manufactured earlier than a predetermined period or impose restrictions on older vehicles. Type of body, .eating 6apacity and 6ubic 6apacity for private cars0 +ating is based on value and cubic capacity and %icensed 6arrying 6apacity (goods or Passengers), as the case may be, in case of commercial vehicles. >ate of Purchase and Price InsuredBs declared value of the vehicle >etails of other vehicles owned by the proposer and details of accidents during the past # to ; years. These details give some idea about the physical and moral ha,ard. >etails of insurance history 0 This is re-uired to ascertain whether there were any adverse features, such as declinature, cancellation or imposition of special terms and conditions. Nuestions relating to e*tra benefits, for which additional premium is charged and of information for which discount of premium is granted, such as no claim discount earned voluntary e*cess to be borne, etc. The answers to the -uestions are followed by declaration in the nature of a warranty that the answers are correct and shall form the basis of contract with the company. CERTIFICATE OF INSURANCE This is the document evidencing that a motor vehicle is insured against third party liability as re-uired under the /otor :ehicle ct, !"$$. It is an offence to use a vehicle without a proper certificate of insurance issued by an authori,ed insure. The only e*ceptions are 8overnment vehicles and such other vehicles as may be specifically e*cluded by the 8overnment. The form of the certificate of insurance is prescribed in the ct (in (=+/ ;!). 6ertain common features appear in all types of certificates of insurance. These are

!(a) 6ertificate number. &(b) +egistration mark and number or description of the vehicle insured. #(c) 3ffective date of commencement of insurance for the purpose of the ct. 4(d) >ate of e*piry of insurance? ;(e) Persons or classes of Persons entitled to drive? '(f) %imitations as to use? These are followed by a certificate signed by the uthori,ed Insurer to the effect that the policy and the 6ertificate of Insurance are issued in accordance with the provisions of the 6hapter K 7 KI of the /otor :ehicle ct, !"$$. The differences in the 6ertificate of Insurance for different types of vehicles are to be found in the items (e) and (f) above. The wordings for private car and motorcycle certificate of insurance are as follows< PERSONS OR CLASSES OF PERSONS ENTITLED TO DRIVE. ANY OF THE FOLLOWING ! &(a) The Insured. #(b) ny other person who is driving on the InsuredBs order or with his permission0 Provided that the person driving holds or had held and has not been dis-ualified from holding an effective driving license with all the re-uired endorsements there on as per the /otor :ehicles ct and the +ules made there under for the time being in force to drive the category of motor vehicle insured hereunder. LOST8 DESTROYED OR MUTILATED CERTIFICATES %odges with an insurer a declaration in which he declares that a 6ertificate of Insurance issued to him by such Insurer has been lost, destroyed or mutilated and sets out full particulars of the circumstances connected with the loss or destruction of the 6ertificate and the efforts made to find it? or +eturns to the Insurer the 6ertificate of Insurance issued to him by such Insurer in a defaced or mutilated condition? and Pays to the Insurer a fee of +s. ;5C0 in respect of each such certificate. The Insurer, shall if reasonably satisfied that such 6ertificate has been lost and that all reasonable efforts have been made to find it, or that it has been destroyed, soiled or is defaced or mutilated as the case may be, issue in lieu thereof a duplicate certificate of Insurance or cover note with the word G>1P%I6 T3B prominently endorsed to that effect. COVER NOTE

cover note is usually issued when the policy and certificates of insurance cannot be immediately issued for any reason. 6over Fotes insuring /otor :ehicles are to be issued only in (orm ;& in terms of +ule !4&, .ub +ule (!) of the 6entral /otor +ules !"$". It terms of +ule !4&, .ub0+ule (&) of 6entral /otor :ehicle +ules !"$", a 6over Fote shall be valid for a period of si*ty days from the date of its issue and the insurer shall issue a policy of Insurance before date of e*piry of the 6over Fote. The cover is worded along the following lines as prescribed by the Tariff< The insured described in the .chedule below having proposed for insurance in respect of the /otor :ehicle (s) described in the .chedule below and having paid the sum of O.the risk is hereby held covered in terms of the 6ompanyBs usual form of O..policy applicable thereto (subject to any special conditions or restrictions which may be mentioned overleaf) for the period between the dates specified in the .chedule unless he cover be terminated by the company by notice in writing, in which case the insurance will thereupon cease and proportionate part of the annual premium otherwise payable for such insurance will be changed for the time the 6ompany has been on risk. +egistered /ark and Fo. or description of the vehicle (s) insured, 3ngine no., chassis Fo. /ake and cubic capacity, type of vehicle (s) etc. Fame and address of Insured. 3ffective date of commencement of Insurance for the purpose of the ct a.m.C p.m. on >ate of 3*piry of insurance. Persons or classes of persons entitled to drive. %imitations as to use. dditional +isks if any. .pecial 6onditions THE COLUMN PROVIDES ARE Policy Fo. Fame of the 6ompany The InsuredBs name and address and Dusiness or =ccupation? Period of Insurance 8eographical rea.

+egistration mark and other details of the vehicle %imitations as to use >river. Premium 6omputation. >ate of signature of Proposal and declaration. .ignature of uthori,ed =fficer.

RENEWAL RECEIPT This is a document which is issued in lieu of the policy at renewal. s a measure of economy and -uick service, these +eceipts are issued. This is a simpler document than the policy. ENDORSEMENT n endorsement is a document, which incorporates change in the terms of the policy. n endorsement may be issued at the time of the policy to provide additional benefits and covers (e.g. %egal %iability to >river) or to impose restrictions (e.g. e*cess accidental damage in a public carrier policy) the wordings of these endorsement are provided in the Tariff. n endorsement may also be issued subse-uently to record changes such as change of address, change of name, change of vehicle etc. The present form of the Tariff contains '; 3ndorsement. RENEWAL NOTICE It is the practice of companies to issue +enewal notice to the insured usually one month in advance of the date of e*piry of the policy. This notice provides details of renewal premium, including Fo 6laim discount, if earned.. s notice is prepared in advance, there could be a claim between the date of preparation and the date of e*piry. The renewal premium invited is subject to the provision that in the event of a claim suitable adjustments will be made in the premium.