Lecture

Class: FY BSc
Subject : Non-Life Insurance – Products, Principles and Practice
Subject Code: PUSASQF2.5
Chapter: Chapter 3
Chapter Name: Motor Insurance

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Today’s Agenda
1. Introduction to Motor Insurance
1. What is motor insurance?
2. Why motor insurance?
3. Segment wise business overview
4. Motor insurance coverage in India
5. Overview on basis of type of vehicle

2. Types of motor insurance products

1. Motor Insurance Coverage
1. Inclusions under Motor Insurance
2. Exclusions under Motor Insurance

3. Motor insurance add-on plans

4. Claims

5. Frauds
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1.1 What is Motor Insurance?
• Motor Insurance is a type of insurance
policy which covers your vehicles from
potential risks financially.
• Policyholder's car or two wheeler is
provided financial security against
damages arising out of accidents and other
threats.
• In addition to the own vehicle damage,
motor vehicle insurance also provides the
mandatory coverage for third-party
liabilities.

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1.2 Why Motor Insurance?
Why should you buy motor vehicle insurance?

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1.3 Segment-wise business overview
Gross Direct Premium income (in and outside India) written by non-life Insurance Industry increased from Rs.
1,53,438 crores in 2017-18 to Rs. 172,483 crores in 2018-19. Personal lines of business namely Motor and Health &
Personal Accident insurance constituted close to two-thirds of the Non-Life Insurance premium. Crop insurance
as an emerging segment comprises majority premium in Other Misc.

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1.4 Motor insurance coverage in India
GDP Underwritten:
Motor insurance continues to be the biggest line of business for general (non-life) insurers.

Market share:
Motor insurance accounted for 36.6% of non-life insurance premiums earned, followed by health insurance at
27.3% in FY20. Upto November’20, the Motor segment (OD, TP & Composite) held a share of 32.59%, the highest
share in the non-life insurance market.

Past Growth Rate:

As per the data published by the Indian insurance regulator, the motor insurance business reported a growth rate of
8.91% in India in 2018-19. India Motor Insurance Market registered a CAGR of 11.36% over the period, 2012 – 2018.

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1.5 Overview on basis of type of vehicle
Motor insurance has been compulsory in India since 1988. According to the reports, the number of new cars sold
annually increased with a CAGR of 6% between 2013 and 2017. Cars and bikes are one of the major transportation
methods in India, making it one of the largest segments.

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2 Types of Motor Insurance
The following types of Insurance policies are available in the market:

Types of Insurance Policies Available for:

Liability Only Policy) For all vehicles
Package Policy/ Comprehensive Policy For all Vehicles
Bundled Policy For new private cars and new two wheelers
Standalone Own Damage Cover For private car and two wheelers (both new
and old

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2 Types of Motor Insurance
The policy periods for various types of policies are as under.

Policy Type Period

Own Damage Third Party Liability
Liability Only Policy NA 1 year (for all vehicles except new
two wheelers and new Private
insurance policy in which the
third party and his/her property Cars) or 3 years (for new Private
or vehicle is covered but the
insurer or his vehicle is not
Car) or 5 years (for new Two
covered Wheeler) Or 2/3 years (for old Two
Wheeler)

Package Policy 1 year (for all vehicles except new 1 year (for all vehicles except new
insurance policy that usually includes two wheelers and new Private two wheelers and new Private
more than one kind of insurance
coverage. The most common Package
Cars) or 2/3 years (for old Two Cars) Or 2/3 years (for old Two
Policy combines property coverage, Wheeler). Wheeler).
such as for buildings or business
contents, with liability coverage, such as
premises liability or product liability.

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 2 Types of Motor Insurance
Policy Type Period
Own Damage Third Party Liability
Bundled Policy 1 year (for new Private Cars and 3 year (for new Private Cars) 5 year
new Two Wheelers) (for new Two Wheeler)
Standalone Own Damage 1 year (for private car and two NA
wheelers (both new and old)

Bundel policy-purchasing multiple insurance

policies from a single company. For example, if
you buy your home and auto insurance policy
from the same place

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2.1 Motor Insurance Coverage
[Link] Damage (OD)

Own Damage is an insurance cover that protects you against the loss and damage that occurred to your own
vehicle like fire, theft, etc. The own damage cover allows you to compensate for the repair and replacement
expenses.

Own Damage policy covers damage to own car due to either of following reasons :
• By fire explosion self ignition or lightning
• By burglary housebreaking or theft
• By riot and strike
• By earthquake (fire and shock damage)
• By flood typhoon hurricane storm tempest inundation cyclone hailstorm frost
• By accidental external means
• By malicious act
• By terrorist activity
• Whilst in transit by road rail inland-waterway lift elevator or air
• By landslide rockslide

Subject to a deduction for depreciation

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2.1.1 Inclusions in a Motor Insurance Policy
Car insurance policies vary between insurers. However, most policies cover the following,

• Comprehensive cover for your car: You will need to prioritise your requirements and compare insurance
policies to identify the one that is appropriate for your needs.

• Damage to your own car: If you are involved in an accident, and your car has borne some damages, you can
notify the insurer at the earliest possible time to claim insurance. Most policies provide you a time frame of 48
hours for intimating the insurance company of the accident.

• Natural calamities: A comprehensive insurance cover for your car can protect it in the event of unpredictable
natural calamities like floods, landslides and earthquakes.

• Personal accident cover: An effective car insurance policy will provide financial assistance to your/your family in
case you are injured in an accident. This helps in reducing your financial burden at a time when you need it
most.

• Man-made disasters: Your car insurance policy can protect your vehicle from various man-made hazards like
strikes, terrorism, riots and fire.

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2.1.1 Inclusions in a Motor Insurance Policy
• Theft of your car: In case you car has been stolen, you can claim for an amount that equates to the insured
declared value specified in your car insurance policy.

• Third-party liability insurance: If a third-party has incurred damages through your car in an accident, a
comprehensive car insurance policy covers the cost of claims.

• Injury to a person: If you have accidently run over a person and injured him, your car insurance policy can
compensate that person/his family for their losses.

• Damage to property: In case of an accident where you have caused damage to a person’s property, your insurer
can pay that person for the damages incurred by him.

In addition to these inclusions, you can enhance your car insurance policy by selecting add-on covers at a higher
premium.

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2.1.2 Exclusions in a Motor Insurance Policy
Exclusions in Car Insurance Policy
A car insurance exclusion involves risks or situations that are not covered in your car insurance policy. These are
always clearly mentioned in the policy documentation. It is important to know your policy exclusions so that you
are prepared when an incident occurs.

The following contingencies are usually excluded under the Motor Insurance Policy:
• Not having a valid Driving License
• Under Influence of intoxicating liquor/drugs
• Accident taking place beyond Geographical limits
• While Vehicle is used for unlawful purposes
• Electrical/Mechanical Breakdowns
• Damage to tyres and tubes unless the vehicle is damages at the same time
• Consequential loss, depreciation, wear and tear

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2.1 Motor Insurance Coverage
The Motor OD premium has grown at a CAGR of 12.1% over the period 2009-10 to 2018-19.

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2.1 Motor Insurance Coverage
GDPI Breakup on Categories - Motor OD

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2.1 Motor Insurance Coverage
OWN DAMAGE PREMIUM CALCULATION
There are several factors on which own damage premium calculation is based on i.e.
• Make and type of vehicle
• Age of the vehicle
• The insured declared value of the vehicle
• The cubic capacity of the vehicle
• Geographical area or zone

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2.1 Motor Insurance Coverage
2. Third Party Liability Insurance cover (TP)

TP liability is the mandatory insurance cover for your vehicle to be

safe and secured. One has to buy third party liability cover for the
mandated purpose under the law of motor vehicle act, 1988.

This cover protects you against the loss and damage that occurred
to the third party vehicle or property that causes someone’s death
or injury due to your vehicle. In this circumstance, you have to deal
with the situation. It would be easier when you already have a
third party liability cover. And, if not you have to incur the loss
expense from your pocket.

One thing that you need to know about third party cover is that it
does not cover loss and damage to your own vehicle which is
responsible for the damage of third party vehicles. For the
compensation of your own vehicle, you have to buy own damage
insurance cover. Also, does not process claim for the stolen or
vandalized vehicle.
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2.1 Motor Insurance Coverage
The Motor TP rates are administered by the IRDAI. The same is reviewed on a periodical basis

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2.1 Motor Insurance Coverage
GDPI Breakup on Categories - Motor TP

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2.1 Motor Insurance Coverage
3. Compulsory Personal Accident Cover (CPA)

Compensation is provided in case of bodily injury/death of owner-driver of the vehicle in direct

connection with the vehicle insured or while mounting into/dismounting from or travelling in the
insured vehicle.

Basic Sum Insured for this cover is Rs. 15 lakh by default. However, the insured can opt for lower
Sum Insured, if owner-driver is already having a 24-hour Personal Accident cover against Death
and Permanent Disability (Total and Partial).

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3 Motor Insurance add-on plans
Apart from the comprehensive and third-party liability insurance plans detailed above, most motor insurance
companies also offer add-on covers that can enhance the coverage of the base policy. These riders should be
purchased from the same insurance provider by paying an additional amount. Some of these add-on plans are
as described below:

1. Zero depreciation cover - This is a popular motor insurance add-on plan that offers significant savings at the
time of a claim. It is also referred to as nil depreciation cover or bumper to bumper policy. Consider that your
vehicle is insured with a comprehensive motor insurance policy. At the time of a claim, you will still have to bear
the expenses pertaining to depreciation of the vehicle parts and excesses. However, if your comprehensive
motor insurance plan was reinforced with a nil depreciation cover, the insurer would bear the expenses for the
depreciation of vehicle parts.

2. Engine protect cover - A comprehensive motor insurance plan does not protect the vehicle from mechanical
or electrical damages to the engine. Buying an engine protect cover offers your engine the much-needed
protection, especially if you reside in an area prone to waterlogging.

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3 Motor Insurance add-on plans
3. Return to Invoice (RTI) cover - This add-on plan protects your vehicle from total loss expenses. In the event of
a total loss scenario such as a car theft, it provides you the actual invoice value of the vehicle, without
accounting for its depreciation with age.

4. Loss of personal belongings cover - Loss of expensive electronic equipment, laptops, etc. kept in the insured
vehicle is offered coverage under this add-on insurance plan.

5. No Claim Bonus (NCB) protect cover - No Claim Bonus is a significant bonus offered by insurers to drivers
who refrain from raising motor insurance claims in a policy year. You can preserve this bonus even after raising a
claim if your vehicle insurance has an NCB protect cover.

6. Personal accident cover for the passengers - The comprehensive car insurance policy can be enhanced to
offer protection for the passengers by opting for this rider.

7. Key replacement cover - Under this cover, the insurance company reimburses the cost of replacement of the
vehicle keys if these were lost or misplaced.

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3 Motor Insurance add-on plans
8. Roadside assistance cover - This add-on cover offers 24/7
protection to the policyholder from incidents such as flat tyre, fuel
depletion, requirement for expert scrutiny, etc.

9. Consumables cover - Components that are used in a vehicle

such as nuts and bolts, screen washers, engine oil, etc. are
collectively referred to as consumables. The insurance company
does not bear the cost of these components at the time of a claim.
However, if your vehicle insurance was equipped with this rider,
you will receive coverage for consumables.

10. Daily allowance cover - This add-on cover offers

reimbursement for the expenses involved in hiring an alternate
vehicle when the insured automobile is undergoing repairs at a
garage.

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4 Claims
Motor Insurance Claim is the process under which a insurance policyholders requests the insurer to
compensate for the expenses/damage incurred by him/her due to an unfortunate event involving his/her
vehicle. The amount and extent of the claim amount depend on the Insured Declared Value (IDV) of your
vehicle and the type of insurance policy bought by you - third party, own damage or comprehensive.

Motor Insurance Claim Process (Flow chart)

[Link]
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4 Claims

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4 Claims
Types of Car Claim Settlement
A car insurance claim can be settled in either of the two ways:

1) Cashless Claim
If you get your car repaired at a garage authorised by the insurer then you enter a cashless claim settlement
process. As the name suggests, under this type of claim the entire process is cashless which means that the
policyholder is not required to pay any cash/money to the insurer authorised garage for the repair of his/her
car. The insurer makes the payment to the garage directly subject to the claim amount. The policyholder is only
liable to pay for the compulsory deductible and voluntary deductible if opted for at the time of policy purchase.

2) Reimbursement Claim
When you get your car repaired at a garage/workshop outside the authorised network of the insurer, you enter
a reimbursement claim settlement process. Under this process, the policyholder makes the payment for the
repair cost at the garage of his/her choice and gets the repair cost reimbursed from the insurer later subject to
the claim amount. The insurer reimburses the entire claim amount to the policyholder after factoring in the
applicable deductibles - compulsory and voluntary (if opted for).

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4 Claims
Claim Settlement Procedure

• Intimation by Insured for accidental loss to subject matter of Insurance

• Registration of Claim by Insurer
• Deputation of Surveyor / Investigator for assessment of liability of Insurer
• Assessment and submission of Survey report by Surveyor
• Scrutiny of Claim file
• Letter to Insured regarding assessment of loss and to submit required information / papers.
• Approval of Claim by the Competent Authority, after receiving the complete information/ papers
• Settlement of Claim

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4 Claims
Documents Required
In case of an Accident
• Duly filled and signed claim form
• Tax receipt
• Copy of the insurance policy
• Copy the vehicle’s registration certificate (RC)
• License copy of the driver driving the vehicle at the time of the accident
• Copy of the FIR/Police Panchanama registered
• An estimate of the vehicle repair cost
• Repair bills and payment receipts (original)
• Vehicle inspection address details

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4 Claims
Documents Required
In case of Theft
• Original insurance policy document
• Tax payment receipt
• Registration book in original
• Authenticated theft declaration from the RTO
• Details of the previous insurance policies such as company, policy number, duration and time of insurance, etc.
• Additional informative handles and accessories, including warranty cards, booklets, duplicate keys, etc.
• FIR and final report of the police
• Official intimation to the RTO about theft and discontinued use of the vehicle
• Letter of Subrogation
• Claim Discharge Voucher (produced with signature across a revenue stamp)
• Form 28, 29, 30 and 35
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5 Frauds

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5 Frauds
Haryana Insurance Scam

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