Motor Insurance Overview

1. Definitions and Key Concepts

Motor Vehicle: Defined in the Motor Vehicles Act, 1988 as a mechanically

propelled vehicle adapted for use on roads, excluding vehicles running on fixed
rails .
Third-Party Insurance: A mandatory cover for any vehicle in public use, paying for
damages caused to third parties by the insured vehicle .
Knock for Knock Agreement: An agreement between insurers where each
company pays for damages to its insured vehicle without establishing blame .

2. Types of Motor Policies

Liability Only Policy: Covers third-party liabilities for bodily injury, death, and
property damage .
Package Policy: Includes coverage for own damage and third-party liabilities .

3. Important Provisions of the Motor Vehicles Act, 1988

Registration and Fitness: Vehicles must be registered and possess a valid fitness
certificate to be driven legally .
Driving License: A valid driving license is required for operating a motor vehicle,
with specific age limits .

4. Coverage and Exclusions

Personal Accident Cover: Available for the owner-driver and passengers .

Exclusions: Policies do not cover use for organized racing, speed testing, or driving
under the influence .

5. Claims and Settlements

Claims Process: Claims must be reported to the insurer, and documentation such
as the proposal form and certificate of insurance is required .
Arbitration: Disputes regarding claim amounts can be settled through arbitration .

6. Regulatory Framework

Insurance Regulatory and Development Authority (IRDA): Regulates motor

insurance policies and ensures compliance with the Motor Vehicles Act .
General Insurance Council: Sets rules for underwriting and settlement processes
.

7. Recent Amendments and Trends

Page 1 of 6
 Motor Vehicles (Amendment) Bill, 2008: Enhances penalties for violations and
gives more power to state governments .
Emerging Technologies: New technologies like night vision and automatic high-
beam control are becoming standard in vehicles .

8. Market Practices

Pooling Arrangement: Insurers share third-party liabilities through a pooling

mechanism to manage risks effectively .
No Claim Bonus (NCB): Discounts on premiums for claim-free years are applicable
under certain conditions .

This summary encapsulates the essential aspects of motor insurance, covering

definitions, policy types, regulatory frameworks, claims processes, and recent trends in
the industry.

Chapter Overview: Motor Insurance Claims

1. Introduction to Motor Insurance Claims

The chapter covers the concept of motor insurance claims, workflows, types of
losses, and the role of surveyors in loss minimization. It also addresses road safety
and fraud mitigation in motor own damage claims .

2. Claim Submission and Types

Claims must be submitted separately for own damage, third-party claims, and
other claims. Insurers are developing a common database to verify claims
experience for own damage .

3. Learning Outcomes

Key topics include:

International legal scenarios in motor insurance.
Third-party claims management in India.
Compensation eligibility and jurisdiction of civil courts.
Alternative settlement methods and principles of damages .

4. Third Party Liability Insurance

This section discusses the legal framework for third-party claims in India, including
who can claim compensation and the jurisdiction of civil courts .

5. Role of Surveyors

Surveyors play a critical role in claims settlement, often leading to delays due to
their dependence on insurers. Their responsibilities include assessing claims and
ensuring settlements are fair .

Page 2 of 6
6. Claim Settlement Process

Claims must be settled within specific timeframes, with penalties for delays. The
IRDA mandates claims settlement within 30 days of receiving all necessary
documents .

7. Assessment of Loss

Loss assessment involves evaluating repair costs, including parts and labor.
Insurers must consider depreciation and the principle of contribution during
settlements .

8. Total Loss and Salvage

In cases of constructive total loss, the net liability is calculated after deducting
salvage value. The insured can retain salvage if they choose to repair the vehicle .

9. Fraud Prevention

Insurers must be vigilant against fraud, particularly in motor own damage claims.
Predictive models are used to identify potentially fraudulent claims early in the
process .

10. Use of Technology in Claims Management

The integration of IT systems aids in premium calculations and claims

management, allowing for real-time data analysis and improved customer service .

11. Customer Experience Management

Effective customer experience management is crucial for insurers, impacting brand

perception and customer retention. Insurers are encouraged to adopt a multi-
channel approach to engage customers .

12. Conclusion

The chapter emphasizes the importance of understanding the claims process, the
role of technology, and the need for effective communication and customer service
in the motor insurance sector.

This summary encapsulates the key concepts and findings of the chapter on motor
insurance claims, providing a comprehensive overview of the processes and
considerations involved.

Motor Vehicle Act Overview

Legal Position and Claims

Page 3 of 6
 Driving Licence Validity: A driving licence must be valid for the specific type of
vehicle. If a driver possesses a licence for a Light Motor Vehicle (LMV) but drives a
commercial vehicle without proper endorsement, the insurer may not be liable for
claims arising from accidents involving that vehicle .
Claim Filing Jurisdiction: Claimants can file petitions in the Claims Tribunal where
they reside, conduct business, where the accident occurred, or where the
insurance policy was issued .

Compensation and Liability

Assessment of Compensation: Compensation for permanent disablement is

assessed based on loss of earning capacity, taking into account the nature of
injuries, future earning potential, and inflation .
No-Fault Liability: The Motor Vehicles Act allows for compensation claims on a
"No Fault" basis, ensuring victims receive compensation without needing to prove
negligence .

Insurance Coverage

Mandatory Insurance: The Motor Vehicles Act mandates that insurance policies
cover third-party liabilities, including injuries to passengers and damage to
property .
Subrogation Rights: Insurers have the right to recover costs from the insured if
they pay out claims due to negligence on the part of the insured .

Judicial Precedents

Driver's Liability: The Supreme Court has ruled that insurers cannot deny liability
based solely on the absence of a driving licence unless the insured knowingly
entrusted the vehicle to an unlicensed driver .
Claims Tribunal Authority: The Claims Tribunal has the authority to handle claims
for both personal injury and property damage, with specific limits on the amount
for property damage .

Important Concepts

Apportionment of Liability: Liability can be apportioned based on the degree of

negligence of each party involved in an accident .
Permanent Disablement Assessment: The assessment of permanent
disablement must consider various factors, including the impact on the individual’s
future earning capacity and the nature of injuries sustained .

Claims Process

Filing Claims: Claims must be filed within specified periods, and the Claims
Tribunal can condone delays under certain circumstances .

Page 4 of 6
 Settlement Options: Various methods exist for settling claims, including out-of-
court settlements and conciliation processes .

This summary encapsulates the key aspects of the Motor Vehicle Act, focusing on legal
positions, compensation assessments, insurance coverage, judicial precedents, and the
claims process.

Compensation for Injuries

Types of Injuries: Compensation for pain and suffering includes various injuries
such as:
Cranial bones or skull injuries
Cerebral concussion (unconsciousness due to brain injury)
Cerebral contusion (bruising of the brain)
Eye damage leading to loss of vision
Fractures of facial bones, ribs, and limbs .

Legal Framework and Procedures

Claims Tribunal Process: After filing a written statement, the Claims Tribunal
frames issues on vital disputed points. This ensures that the court must decide on
these points based on evidence presented .
Motor Vehicle Act 1988:
Section 14(2)(a) states that a driving license for a transport vehicle is effective
for three years. Section 3(1) prohibits driving without a valid license .
Section 167 allows claims under both the Motor Vehicle Act and the
Employee's Compensation Act, but not under both simultaneously. Section
163A provides for structured compensation without proving negligence .

Compensation Guidelines

No Fault Liability: Under Section 140, victims can claim compensation without
proving negligence. This includes a fixed amount for death or permanent
disablement .
Assessment of Damages:
For death, permissible heads include loss of dependency, funeral expenses,
and loss of consortium .
In cases of injury, global compensation is awarded, and actual medical
expenses are reimbursed .

Negligence and Liability

Negligence Definition: Negligence is defined as the failure to exercise reasonable

care that could foreseeably cause injury to others. The degree of care required
varies based on circumstances .

Page 5 of 6
 Contributory Negligence: Even if the victim contributed to the accident, they may
still claim under no fault liability .

Fraud Detection in Claims

Fraudulent Claims: The system is susceptible to fraudulent claims, necessitating

thorough investigation and verification of evidence, including police reports and
witness statements .
Documentary Evidence: Essential documents for fraud detection include FIRs,
inquest reports, and post-mortem reports .

Judicial Precedents

Binding Precedents: The doctrine of binding precedent ensures that decisions

made by higher courts must be followed by lower courts, promoting consistency in
legal rulings .
Judicial Responsibility: Courts must ensure that their decisions are clear and
consistent, as they contribute to the development of jurisprudence .

Conclusion on Compensation Assessment

Multiplier Method: The multiplier method is used to calculate compensation

based on the deceased's income and expected future earnings, adjusted for age
and prospects .
Structured Compensation: Section 163A provides a structured formula for
compensation, which does not require proof of negligence, facilitating quicker
relief for victims .

Page 6 of 6