FACULTY OF INSURANCE AND SOCIAL PROTECTION (FISP)
DEPARTMENT OF INSURANCE
BIRM 2
I RU_07414
MOTOR I NSURANCE
TOPIC 1
SHEBE F MOTOR INSURANCE 1
SUB-ENABLING OUTCOMES
End of session(s), you are expected to be able to do the following;
Historical development of motor insurance business in global context
Legal and regulatory aspect govern motor and motor insurance business
Describe principles differences in undertaking motor insurance business activities
Insurance policy structure on different types of motor insurance product
Motor insurance distribution and market mechanism
Risk Assessment techniques and methods in underwriting motor insurance business
Claims settlement principles in handling motor insurance business
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REQUIRED READINGS
End of session(s), you are expected to be able to do the following;
Lawrence Hardholf, Larry S. Nordoff (2005), Motor Vehicle Collision Injuries, Jones and Barlett Publishers.
Rossi, J.P. (2001), Entrepreneurship and Innovation in Automobile Insurance, Garland Science (UK).
Georges Dionne, Claire Laberge-Nadeau (1999): Automobile Insurance, Springer.
Chartered Insurance Institute (1991), Private Motor Insurance Course No.610
Chartered Insurance Institute (1991), Commercial Motor Insurance Course NO.615
RECOMMENDED READINGS
Freeman, M.A (1984) Motor Insurance, OYEZ Longman, London
Insurance Institute of India, (1991 Edition) Motor Insurance IC.72.
Cannar, Kenneth, (1979), Motor Insurance Theory and Practice London: Witherby & Co.
E.R.H. Ivamy (1977), Fire and Motor Insurance Butterworths London.
Motor insurance 2018–19 Study text
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HISTORICAL DEVELOPMENT
MOTOR INSURANCE
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HISTORICAL DEVELOPMENT
1767 – First stream propelled carriage was built
18th century steam cars where invented
Karl Benz and Gottlie Diamler, working independently and unknown to each other inverted internal
combustion-engine
In 1885 and 1894 the first motor car, a two seater Benz car was introduced in England
Until first world war (1914 -1918) Private motoring was mostly for the rich people, but mechanically
propelled vehicles were increasingly being used commercially and in particular, as buses
During the first world war, a large number of young men learned to drive army vehicles, it was no
longer only rich men’s hobby.
Young generation strived to raise finance to buy motor vehicle and became easy with hire purchase.
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CHARACTERISTICS OF EARLY MOTOR VEHICLES
• LOW
• HIGH TEMPERATURE
• GREATER CHANCE OF BLOWING THAN CAUSING DAMAGE TO OTHER
PEOPLE
• NO CAPACITY TO COMPENSATE MOTOR ACCIDENT VICTIMS
• OWNERS HAD NO INSURANCE
• LACKED SUFFICIENT INSURANCE COVERS
• SUCH CIRCUMSTANCES PROMPTED TO AN INCREASED DEMAND FOR
COMPULSORY THIRD PARTY MOTOR INSURANCE
• LACKED SUFFICIENT DATA AND KNOWLEDGE
• NO ACCURATE CALCULATIONS
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EARLY NEED FOR MOTOR INSURANCE
Compensation against victims of road accidents
- Injury to other road users
- Injury to passengers
- Property damage to third parties
-Compensate vehicle owners against accidental losses.
CLASS ACTIVITY 1
Discuss the need for Motor Insurance
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EARLY DEVELOPMENT CONTINUES…
❖Proceeding to the WW1
❖Growing volume for motor insurance business available for insurers
❖Composite offices, larger business prompted to creation of more adequate covers
❖1920s competition began to take it course
❖Accident Office Association introduced;- Common guidelines - Basic rates for motor insurance-
Intended to eliminate unhealthy competition- Introduction of motor tariff
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CLASS ACTIVITY -2
Discuss Formation and dissolution of the motor tariff
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MAJOR LEGISLATIVE DEVELOPMENTS
1930 Introduction of Road Traffic Act, Imposed
- Insure or provide security against legal liability for death or bodily injury to third parties
- Issuance of certificate of insurance as evidence of policy
- Provision of hospital charges
The Road Traffic Act 1960
– no changes BUT, incorporation of legislation of 1956
- Prohibiting drinking and driving
The Road Traffic Act 1972
– no changes BUT, Incorporation of 1971
- Motor Vehicle ( Passenger Insurance Act 1971) which made passenger liability compulsory
The Road Traffic Act 1988
- majorly expansion of legal obligation
- Third party property must be covered by insurance
- third party must be compensated although the vehicle must may be driven by unauthorized driver
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1988 – EUROPEAN UNION MOTOR REFORMS
Insurance Changes acknowledge through these reforms;
Standardized Motor insurance into
-Third party only,
- Third party fire & theft
-Comprehensive cover
-- Protection of drivers and uninsured drivers on third party risks
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CLASS ACTIVITY 3
With reference to Tanzania context, Examine top causes of Car accidents.
Discuss the statistics of motor accidents
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FACULTY OF INSURANCE AND SOCIAL PROTECTION (FISP)
DEPARTMENT OF INSURANCE
BIRM 2
I RU_07414
MOTOR I NSURANCE
TOPIC 2
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MOTOR INSURANCE CLASSES
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CLASSES/TYPES OF MOTOR INSURANCE
1. Private motor Insurance
2. Motorcycle Insurance
3. Commercial motor Insurance
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PRIVATE MOTOR INSURANCE
Private motor insurance generally is motor insurance for all private motor vehicles owned by
individuals or companies.
In terms of the number of people affected, private motor insurance is the most significant
compulsory insurance in insurance industry.
Standard policy cover
There are 4 different levels of cover available in this policy.
The lowest level being the most restrictive and extra areas of cover added for each level at an additional
premium:
• Road traffic act only (RTA)
• Third party only
• Third party, fire and theft
• comprehensive
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ROAD TRAFFIC ACT ONLY (RTA ONLY)
As its name implies, it is the lowest or minimum cover required to comply with the road traffic
act 1988 as amended by the legislation of united kingdom (EU countries).
The cover relates to the use of the motor vehicle on road or any public place only and
It provides Indemnity for bodily injury or death caused to 3rd party, including passengers:
unlimited in amounts.
Also, it covered a very limited liability for 3rd party property damage.
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CONTINUES…
Very few RTA only policies were issued since the introduction of compulsory third party property
damage under the 1988 Act (European union).
This means that the difference in cover between RTA only and third party is not much bigger.
Therefore , For all practical purposes, the lowest level of cover offered by insurers is Third party
only.
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THIRD PARTY ONLY
In addition to providing RTA cover, the third party only cover usually provides the following:
Cover for the vehicles whilst not on road or in a public place but remaining within the territorial
limits. E.g.. In Tanzania boundaries
An increased limit of liability for 3rd party property damage as compared to RTA.
Indemnity to anyone who is using the insured private vehicle by the permission of the
owner/insured
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CONTINUES…
Indemnity to passengers, employers or business partners, should they be held responsible for an
accident.
Legal costs incurred in defence of a claim.
The specific exclusions that relate to third party only are:
Damage to property (including vehicle - no cost of repairs) owned, held in trust by or in the
custody or control of any person claiming indemnity under the policy.
Liability covered by any other insurance policy. E.g. health insurance, property insurance
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THIRD PARTY, FIRE AND THEFT
In addition to the third party only just described, third party, fire and theft cover includes cost of
repairs or compensation to the insured if vehicle is:
Damaged by fire, lighting or explosion
Damaged either during attempted theft or while it is being stolen
Stolen and not recovered.
WHY CHOOSE THIS COVER?
Many individuals who choose this is because they need cover for some major perils but do not want to
pay more premium for large cover (comprehensive one).
Specific Exclusions
Those mentioned in the third party only and
Loss of use.
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COMPREHENSIVE COVER
It offers a widest possible protection that in addition to third party fire and theft, it includes cover of
other accidents and malicious damages to the insured vehicle.
This cover is provided in ‘all risk’ basis, meaning that it covers all risks excluding the following :
Loss or damage to accessories and spare parts unless they are attached on the vehicle or in insured’s
garage.
Damage due to wear and tear
Depreciation but not including glass damage
Loss of use
Mechanical and electrical failure or breakdown. (but if collision occur after brake failure the resultant
damage is covered)
Tyre damage from punctures or blow-outs unless happened during accidents.
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CONTINUES…
Included benefits without premium increase
There are also a number of included benefits in cover that are included without additional cost. These
includes
➢Personal accident cover- i.e. it pays limited sums in case of specific injury like loss of limb or sight
➢Medical expenses cover i.e. pays limited for medical expenses for insured or passengers
➢Personal effects/belongings cover- i.e. pays limited sums for belongings like laptops e.t.c
Note
The above benefits (extensions) are of very limited and short compared as to stand-alone policies of the
same nature.
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Optional extensions
To the available standard policy cover, there are optional extension which insured can benefit
with just an increase of premium.
Breakage of glass – it is included in comprehensive only so for other non comprehensive cover,
insured can opt it with additional premium.
Personal belongings and clothing – it is included in comprehensive but in just a fairly modest
sum, so to increase the coverage u can take it as an optional extension.
Loss of use – although it is specifically excluded but with additional premium sum insurers are
willing to offer cover, limited to an amount per day or a replacement vehicle whilst the insured’s
is off the road.
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CLASS ACTIVITY -4
MOTOR INSURANCE
With illustrative examples, describe excess and excess buyback as used in
motor insurance
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CONTINUES…
Personal accident benefits – just as in personal belongings extension, this also intends to
increase coverage . E.g. increased capital benefits of addition of weekly benefits for the insured
or spouse.
Foreign use – in Tanzania, we have a COMESA cover. The COMESA cover allows insured to use his
vehicle outside the territorial limits of Tanzania. Provided with additional premium.
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LIMITATIONS
In addition to specific exclusions, there are number of general and market exclusions applicable to all
sections of the policy, including;
Driving by unlicensed drivers
Use of vehicle outside the permitted use by policy
Contractual liability
War risks
Radioactive contamination and explosive nuclear assembly
Riot and civil commotion
Sonic bangs (waves from supersonic aircraft or other aerial devices)
Pollution and contamination unless arising from a single identifiable event.
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SUMMARY
Summary of the Motor comprehensive insurance coverage includes the following;
Own damage cover – for damage to the vehicle itself
Third party risk cover
Medical expenses cover
Personal accident cover
Personal effects cover
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MOTORCYCLE INSURANCE
overview
Motorcycle means any kind of cycle propelled mechanically and includes mopeds. The options of
the different levels of cover are all the same as in private motor vehicle.
Standard policy cover
The comprehensive policy format is the same as that used in private car insurance but with following
main differences:
There is no cover for theft of accessories or spare parts unless the cycle itself is stolen;
There is usually no personal accident, medical expenses or personal effects cover.
The excess is different from that of cars. (this brings a problem because any normal severe accident of
boda-boda the repair cost mostly falls within 100,000/= which is the amount of excess
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Optional extensions
Trailers –
Personal accident
More than one cycle insured – some insurer reduce premium if more than one cycle is insured
with same insurers.
limitations
The policy exclusions, or limitations of motorcycle are same as for private motor insurance.
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COMMERCIAL VEHICLES…
The main types of commercial vehicles are:
Goods-carrying vehicles
Carriage of passengers for hire and reward (such as taxis)
Passenger-carrying vehicles (buses, coaches and minibuses) also usually for hire or reward but
not
Agricultural and forestry vehicles (such as tractors)
Vehicles of special construction or special types e.g. ambulances, cranes, forklift trucks, earth
movers.
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COMMERCIAL VEHICLES
Points regarding third party liability:
Loading or unloading: Cover in respect of third-party liabilities also applies to accidents
occurring during loading or unloading the vehicle. In the case of the driver or attendant, this
extends beyond the boundaries of the carriageway
Indemnity to driver: Generally, anyone may drive the vehicle on the order or with the
permission of the insured
Indemnity to user: The insured may allow someone to use the vehicle for social, domestic, and/
or pleasure purposes (though they may not necessarily actually be driving)
Indemnity to passengers: This covers the liability of passengers for their negligent acts
Legal costs: As with private motor cover, commercial motor insurance provides cover for certain
legal costs
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COMMERCIAL VEHICLES
Like private car insurance, commercial vehicle insurance is concerned with insuring against
damage to the vehicle, and liabilities to others arising out of the use of the vehicle
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CLASS ACTIVITY -2
With an aid of a motor insurance policy, distinguish third party cover offered in private motor
insurance from commercial insurance cover
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