CHAPTER NO.

1
INTRODUCTION TO INSURANCE SECTOR
Insurance is a form of risk management primarily used to hedge against
the risk of a contingent loss. Insurance is defined as the equitable transfer
of the risk of a loss, from one entity to another, in exchange for a
premium, and can be thought of as a guaranteed and known small loss to
prevent a large, possibly devastating loss. An insurer is a company selling
the insurance; an insured or policyholder is the person or entity buying
the insurance.
The insurance rate is a factor used to determine the amount to be charged
for a certain amount of insurance coverage, called the premium.
Insurance means a promise of compensation for any potential future
losses. It facilitates financial protection against by reimbursing losses
during crisis.
There are different insurance companies that offer wide range of
insurance options and an insurance purchaser can select as per own
convenience and preference. Several insurances provide comprehensive
coverage with affordable premiums. Premiums are periodical payment
and different insurers offer diverse premium options.
The periodical insurance premiums are calculated according to the total
insurance amount. Mainly insurance is used as an effective tool of risk
management as quantified risks of different volumes can be insured.

Types of Insurance:
Major types of insurances are as mentioned below:
Life insurance: Descendants family receives financial benefits. Life
insurances also offer paid proceeds to the beneficiary.
Automobile insurance: Usually automobile insurances cover damages
and legal financial expenditures of the automobile driver.
Health insurance: Health insurance cover the expenditures associated
to treatment and medical expenditures.
Credit insurance: Borrowers often fail to repay debts, loans and
mortgages due to certain unavoidable circumstances, credit insurances
can be of great help during such crisis.
Property insurance: Property protection insurance provide protection
from risks associated to theft, fire, floods etc.
This type of insurance can be further classified into specialized forms as
follows:
Fire insurance
Earthquake insurance
Flood insurance
Home insurance
Boiler insurance

At present insurance market is much vibrant than before and this has an
impact on the rates of different insurance premiums.
Types of Insurance Companies:
Insurance companies can be categorized into two main divisions which
are as follows:
General Insurance Companies: They provide all types of insurance
apart from life insurance.
Life Insurance Companies: The companies, dealing with life
insurance, pension products and annuities are life insurance companies.
Insurance companies are usually identified as stock companies. Insurance
is a device for indemnifying an individual against loss and in the recent
past due to natural calamities, few insurance companies have suffered
financial setback. Premiums of little insurance have suddenly gone uphill
as plenty of insurance providers have become insolvent. While selecting
an insurance company, financial strength of the company must be
considered as viability of the insurance provider is extremely crucial.

GENERAL INSURANCE IN INDIA

The entire general insurance business in India was nationalized by the
Government of India (GOI) through the General Insurance Business
(Nationalization) Act (GIBNA) of 1972. 55 Indian insurance companies
and 52 other general insurance operations of other companies were
nationalized through the act.
The General Insurance Corporation of India (GIC) was formed in
pursuance of Section 9(1) of GIBNA. It was incorporated on 22
November 1972 under the Companies Act, 1956 as a private company
limited by shares. GIC was formed to control and operate the business of
general insurance in India.
The GOI transferred all the assets and operations of the nationalized
general insurance companies to GIC and other public-sector insurance
companies. After a process of mergers and consolidation, GIC was reorganized with four fully owned subsidiary companies: National
Insurance Company Limited, New India Assurance Company Limited,
Oriental Insurance Company Limited and United India Insurance
Company Limited.
GIC and its subsidiaries had a monopoly on the general insurance
business in India until the landmark Insurance Regulatory and
Development Authority Act (IRDA Act) of 1999 came into effect on 19
April 2000. This act also amended the GIBNA Act and Insurance Act of
1938. The act along with the amendments ended the monopoly of GIC
and its subsidiaries and liberalized the insurance business in India.

In November 2000, GIC was refortified as India's Reinsure, but its

supervisory role over its subsidiaries was ended. This was followed by
the General Insurance Business (Nationalization) Amendment Act of
2002. Coming into effect from 21 March 2003, this amendment ended
GIC's role as a holding company of its subsidiaries. The ownership of the
subsidiaries was transferred to the Government of India, which in turn
divested its stake in the companies through listings on Indian stock
exchanges.
As a result of these reforms, GIC became the sole Re-Insurer in India,
and is now called GIC Re. Indian insurance companies are required by
law to cede 10% of every policy value to GIC Re, subject to some
limitations and exceptions. GIC Re has diversified its operations and is
now emerging as an important Re-Insurer in SAARC countries, Southeast
Asia, Middle East and Africa. GIC Re has also expanded its international
operations through branches in London and Moscow.
GIC Re has a rating of A- (Excellent) from A. M. Best for its financial
strength.

LIFE INSURANCE IN INDIA

Life insurance is a contract between an insurance policy holder and an
insurer, where the insurer promises to pay a designated beneficiary a sum
of money (the "benefits") upon the death of the insured person.
Depending on the contract, other events such as terminal illness or critical
illness may also trigger payment. The policy holder typically pays a
premium, either regularly or as a lump sum. Other expenses (such as
funeral expenses) are also sometimes included in the premium; however,
in Australia the predominant form simply specifies a lump sum to be paid
on the policy holder's death.
The advantage for the policy owner is "peace of mind", in knowing that
the death of the insured person will not result in financial hardship for
loved ones.
Life policies are legal contracts and the terms of the contract describe the
limitations of the insured events. Specific exclusions are often written
into the contract to limit the liability of the insurer; common examples are
claims relating to suicide, fraud, war, riot and civil commotion.
Life-based contracts tend to fall into two major categories:

Protection policies designed to provide a benefit in the event of

specified event, typically a lump sum payment. A common form of this
design is term insurance.
Investment policies where the main objective is to facilitate the
growth of capital by regular or single premiums. Common forms (in the
US) are whole life, universal life and variable life policies.

A protection against the loss of income that would result if the insured
passed away. The named beneficiary receives the proceeds and is thereby
safeguarded from the financial impact of the death of the insured.
The goal of life insurance is to provide a measure of financial security for
your family after you die. So, before purchasing a life insurance policy,
you should consider your financial situation and the standard of living
you want to maintain for your dependents or survivors. For example, who
will be responsible for your funeral costs and final medical bills? Would
your family have to relocate? Will there be adequate funds for future or
ongoing expenses such as daycare, mortgage payments and college? It is
prudent to re-evaluate your life insurance policies annually or when you
experience a major life event like marriage, divorce, the birth or adoption
of a child, or purchase of a major item such as a house or business.
HISTORY OF INSURANCE SECTOR IN INDIA
Insurance in India has its history dating back till 1818, when Oriental Life
Insurance Company was started by Europeans in Kolkata to cater to the
needs of European community. Pre-independent era in India saw
discrimination among the life of foreigners and Indians with higher
premiums being charged for the latter. It was only in the year 1870,
Bombay Mutual Life Assurance Society, the first Indian insurance
company covered Indian lives at normal rates.

At the dawn of the twentieth century, insurance companies started

mushrooming up. In the year 1912, the Life Insurance Companies Act,
and the Provident Fund Act were passed to regulate the insurance
business.

The Life Insurance Companies Act, 1912 made it necessary that the
premium rate tables and periodical valuations of companies should be
certified by an actuary. However, the disparage still existed as
discrimination between Indian and foreign companies. The oldest existing
insurance company in India is National Insurance Company Ltd, which
was founded in 1906 and is doing business even today.
Important milestones in the life insurance business in India are:
1912 The Indian Life Assurance Companies Act enacted as the first
statute to regulate the life insurance business.
1928 The Indian Insurance Companies Act enacted to enable the
government to collect statistical information about both life and non-life
insurance businesses.
1938 Earlier legislation consolidated and amended to by the Insurance
Act with the objective of protecting the interests of the insuring public.
1956 245 Indian and foreign insurers and provident societies taken
over by the central government and nationalized. LIC formed by an Act
of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5
crore from the Government of India.
The General insurance business in India, on the other hand, can trace its
roots to the Triton Insurance Company Ltd., the first general insurance
company established in the year 1850 in Calcutta by the British.
Some of the important milestones in the general insurance business in
India are:
1907 The Indian Mercantile Insurance Ltd. set up, the first company to
transact all classes of general insurance business.

1957 General Insurance Council, a wing of the Insurance Association

of India, frames a code of conduct for ensuring fair conduct and sound
business practices.
1968 The Insurance Act amended to regulate investments and set
minimum solvency margins and the Tariff Advisory Committee set up.
1972 The General Insurance Business (Nationalization) Act, 1972
nationalized the general insurance business in India with effect from 1st
January 1973.
Till 1999, there were no private insurance companies in Indian insurance
sector.

The Government of India, then introduced the Insurance

Regulatory and Development Authority Act in 1999, thereby deregulating the insurance sector and allowing private companies into the
industry.

Foreign investment was also allowed and capped at 26%

holding in the Indian insurance companies. In recent years many private

players entered in the Insurance sector of India.
The history of Insurance in India started with life insurance in 1818 when
it was conceived as a means to provide for English Widows. Interestingly
in those days a higher premium was charged for Indian lives than the
non-Indian lives as Indian lives were considered more risky for the
coverage. The Bombay Mutual Life Insurance Society started its business
in 1870. It was the first company to charge same premium for both Indian
and non-Indian lives. The Oriental Assurance Company was established
in 1880. The General Insurance Business in India, on the other hand, can
trace its roots to the Triton (Tital) Insurance Company Limited, the first
general insurance company established in the year 1850 in Calcutta by
the British. Till the end of nineteenth century insurance business was
almost entirely in the hands of overseas companies.

Insurance regulation formally began in India with the passing of the Life
Insurance Companies Act of 1912 and the provident fund Act of 1912.
Several frauds during 1920's and 1930's sullied insurance business in
India.
By 1938 there were 176 insurance companies. The first comprehensive
legislation was introduced with the Insurance Act of 1938 that provided
strict State Control over insurance business. The insurance business grew
at a faster pace after independence. Indian companies strengthened their
hold on this business but despite the growth that was witnessed, insurance
remained an urban phenomenon.
INSURANCE JOB DESCRIPTION
The insurance job description which is generally assigned to people
working in the insurance industry is given below:

To handle all the affairs of the customer related to the policies or

the services offered by the insurance company and to resolve any

conflicts arising if any.

To work for insurance company or several insurance companies

and finding clients in order to create awareness about the insurance

policies that the insurance company has to offer.

The job responsibility may include finding out if the claim made by

the client for insurance cover warrantees insurance or not.

To investigate whether all the premiums were paid on time and

whether the claim made falls in the particular insurance policy.

To meet potential customers and sell them the insurance policies

being offered by the insurance company.

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Competencies required for job in insurance

Any Insurance job seeker must possess the following set of skills:

Public Speaking: A good insurance professional should have

strong communication as well as public speaking skills.

Computer knowledge: Basic knowledge of computers including

Microsoft Word, WordPerfect, Outlook, Excel, PowerPoint, Tally etc

would prove to be an asset.

People skills: An Insurance professional should be able to

communicate as well as interact with other working professional

including colleagues as well as clients of the company.

Organizational skills: As an insurance job includes organizing

work it is necessary to have good skills in this department.

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OVERVIEW OF INDIAN INSURANCE SECTOR

The Insurance sector in India governed by Insurance Act, 1938, the Life
Insurance Corporation Act, 1956 and General Insurance Business
(Nationalisation) Act, 1972, Insurance Regulatory and Development
Authority (IRDA) Act, 1999 and other related Acts. With such a large
population and the untapped market area of this population Insurance
happens to be a very big opportunity in India. Today it stands as a
business growing at the rate of 15-20 per cent annually. Together with
banking services, it adds about 7 per cent to the countrys GDP .In spite
of all this growth the statistics of the penetration of the insurance in the
country is very poor. Nearly 80% of Indian populations are without Life
insurance cover and the Health insurance. This is an indicator that growth
potential for the insurance sector is immense in India. It was due to this
immense growth that the regulations were introduced in the insurance
sector and in continuation Malhotra Committee was constituted by the
government in 1993 to examine the various aspects of the industry. The
key element of the reform process was Participation of overseas insurance
companies with 26% capital. Creating a more efficient and competitive
financial system suitable for the requirements of the economy was the
main idea behind this reform.
Since then the insurance industry has gone through many sea changes
.The competition LIC started facing from these companies were
threatening to the existence of LIC .since the liberalization of the industry
the insurance industry has never looked back and today stand as the one
of the most competitive and exploring industry in India. The entry of the
private players and the increased use of the new distribution are in the
limelight today. The use of new distribution techniques and the IT tools
has increased the scope of the industry in the longer run.
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Indian Insurance Market History

Insurance has a long history in India. Life Insurance in its current form
was introduced in 1818 when Oriental Life Insurance Company began its
operations in India. General Insurance was however a comparatively late
entrant in 1850 when Triton Insurance company set up its base in
Kolkata. History of Insurance in India can be broadly bifurcated into
three eras:
a) Pre Nationalization
b) Nationalization and
c) Post Nationalization.

Life Insurance was the first to be nationalized in 1956. Life Insurance

Corporation of India was formed by consolidating the operations of
various insurance companies. General Insurance followed suit and was
nationalized in 1973. General Insurance Corporation of India was set up
as the controlling body with New India, United India, National and
Oriental as its subsidiaries. The process of opening up the insurance
sector was initiated against the background of Economic Reform process
which commenced from 1991. For this purpose Malhotra Committee was
formed during this year who submitted their report in 1994 and Insurance
Regulatory Development Act (IRDA) was passed in 1999. Resultantly
Indian Insurance was opened for private companies and Private Insurance
Company effectively started operations from 2001.

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Insurance Market- Present:

The insurance sector was opened up for private participation four years
ago. For years now, the private players are active in the liberalized
environment. The insurance market have witnessed dynamic changes
which includes presence of a fairly large number of insurers both life and
non-life segment. Most of the private insurance companies have formed
joint venture partnering well recognized foreign players across the globe.
There are now 29 insurance companies operating in the Indian market
14 private life insurers, nine private non-life insurers and six public sector
companies. With many more joint ventures in the offing, the insurance
industry in India today stands at a crossroads as competition intensifies
and companies prepare survival strategies in a detariffed scenario.
There is pressure from both within the country and outside on the
Government to increase the foreign direct investment (FDI) limit from the
current 26% to 49%, which would help JV partners to bring in funds for
expansion.
There are opportunities in the pensions sector where regulations are being
framed. Less than 10 % of Indians above the age of 60 receive pensions.
The IRDA has issued the first licence for a standalone health company in
the country as many more players wait to enter. The health insurance
sector has tremendous growth potential, and as it matures and new
players enter, product innovation and enhancement will increase. The
deepening of the health database over time will also allow players to
develop and price products for larger segments of society.
State Insurers Continue To Dominate There may be room for many more
players in a large underinsured market like India with a population of
over one billion. But the reality is that the intense competition in the last
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five years has made it difficult for new entrants to keep pace with the
leaders and thereby failing to make any impact in the market.
Also as the private sector controls over 26.18% of the life insurance
market and over 26.53% of the non-life market, the public sector
companies still call the shots.
The countrys largest life insurer, Life Insurance Corporation of India
(LIC), had a share of 74.82% in new business premium income in
November 2005.
Similarly, the four public-sector non-life insurers New India Assurance,
National Insurance, Oriental Insurance and United India Insurance had
a combined market share of 73.47% as of October 2005. ICICI Prudential
Life Insurance Company continues to lead the private sector with a 7.26%
market share in terms of fresh premium, whereas ICICI Lombard General
Insurance Company is the leader among the private non-life players with
a 8.11% market share. ICICI Lombard has focused on growing the market
for general insurance products and increasing penetration within existing
customers through product innovation and distribution.
Reaching Out To Customers No doubt, the customer profile in the
insurance industry is changing with the introduction of large number of
divergent intermediaries such as brokers, corporate agents, and
bancassurance.

The industry now deals with customers who know what they want and
when, and are more demanding in terms of better service and speedier
responses. With the industry all set to move to a detoxified regime by

15

2007, there will be considerable improvement in customer service levels,

product innovation and newer standards of underwriting.
Intense Competition In a de-tariff environment, competition will manifest
itself in prices, products, underwriting criteria, innovative sales methods
and creditworthiness. Insurance companies will vie with each other to
capture market share through better pricing and client segmentation.
The battle has so far been fought in the big urban cities, but in the next
few years, increased competition will drive insurers to rural and semiurban markets.
Global Standards While the world is eyeing India for growth and
expansion, Indian companies are becoming increasingly world class. Take
the case of LIC, which has set its sight on becoming a major global player
following a Rs280-crore investment from the Indian government. The
company now operates in Mauritius, Fiji, the UK, Sri Lanka, Nepal and
will soon start operations in Saudi Arabia. It also plans to venture into the
African and Asia-Pacific regions in 2006.
However, with robust reinsurance programmes in place, insurers have
successfully managed to tide over the crisis without any adverse impact
on their balance sheets.
With life insurance premiums being just 2.5% of GDP and general
insurance premiums being 0.65% of GDP, the opportunities in the Indian
market place is immense. The next five years will be challenging but
those that can build scale and market share will survive and prosper.

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CHAPTER NO.2
PRINCIPALES OF INSURANCE

Main principles of Insurance:

Utmost good faith
Indemnity
Subrogation
Contribution
Insurable Interest
Proximate Cause

Utmost Good Faith (Uberrimae Fides)

As a client it is your duty to disclose all material facts to the risk being
covered. A material fact is a fact which would influence the mind of a
prudent underwriter in deciding whether to accept a risk for insurance and
on what terms. The duty to disclose operates at the time of inception, at
renewal and at any point mid term.
Indemnity
On the happening of an event insured against, the Insured will be placed
in the same monetary position that he/she occupied immediately before
the event taking place. In the event of a claim the insured must:

17

 Prove that the event occurred

Prove that a monetary loss has occurred
Transfer any rights which he/she may have for recovery from another
source to the Insurer, if he/she has been fully indemnified.
Subrogation
The right of an insurer which has paid a claim under a policy to step into
the shoes of the insured so as to exercise in his name all rights he might
have with regard to the recovery of the loss which was the subject of the
relevant claim paid under the policy up to the amount of that paid claim.
The insurers subrogation rights may be qualified in the policy.
Contribution
The right of an insurer to call on other insurers similarly, but not
necessarily equally, liable to the same insured to share the loss of an
indemnity payment i.e. a travel policy may have overlapping cover with
the contents section of a household policy. The principle of contribution
allows the insured to make a claim against one insurer who then has the
right to call on any other insurers liable for the loss to share the claim
payment.
Insurable Interest
If an insured wishes to enforce a contract of insurance before the Courts
he must have an insurable interest in the subject matter of the insurance,
which is to say that he stands to benefit from its preservation and will
suffer from its loss.

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Proximate Cause
An insurer will only be liable to pay a claim under an insurance contract
if the loss that gives rise to the claim was proximately caused by an
insured peril. This means that the loss must be directly attributed to an
insured peril without any break in the chain of causation.

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CHAPTER NO.3
IRDA
The IRDA (Insurance Regulatory and Development Authority) is the
national regulatory body for Insurance industry (both Life and Non-Life
Insurance Companies) under the auspices of Government of India,
situated at Hyderabad. IRDA was established by an act enacted in Indian
Parliament known as IRDA Act 1999 and was amended in 2002 to
incorporate some emerging requirements as well as to overcome some
deficiencies in the entire process. The mission of IRDA as stated in the
act is as follows:a) To protect the interests of the policyholders
b) To promote, regulate and ensure orderly growth of the insurance
industry and for matters connected therewith or incidental thereto
c) Conduction of insurance businesses across India in an ethical manner.
Full force and maximum utility of various institutions like Advisory
Committee and self-regulatory organizations are not yet realized in India
as the regulator seems to be in a long-learning mode. Due to over
delegations, it is the individual incumbents that decide the pace and
extent of utilization of prudential and statutory bodies. Research on
insurance sector is limited to opinion being sought through legacy
channels. The Indian market mulls and patiently awaits the revision of
insurance act along with establishment meaningfully functioning
regulatory bodies that are devoid of excess delegation and subjective
localization of development agencies.

20

Unlike other Indian administrative Regulatory Bodies which are highly

proactive, IRDA is perceived as a silent regulator with activities confined
to its local existence. The IRDA law has been enacted with following
expectations from IRDA: To protect the interests of and secure fair treatment pertaining to
policyholders.
To bring about speedy, regulated and orderly growth of the insurance
industry (including annuity and superannuation payments), for the benefit
of the common man and to provide long-term funds for accelerating
growth of Indian economy.
To set, promote, monitor and enforce high standards of competence,
fair dealing, financial soundness and integrity of those that comes under
the purview of its jurisdiction and regulation.
To ensure that insurance policyholders and prospective customers
receive precise, clear, correct and factual information regarding Insurance
products and services being offered and make them aware of their
responsibilities and duties in this regard.
To ensure speedy settlement of genuine insurance claims, to prevent
insurance frauds, misappropriation of funds and other malpractices & to
promote, regulate and oversee effective functioning of grievance
redressal machinery and disposing off grievances in a swift manner.

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 To promote fairness, transparency and orderly conduct in financial

markets dealing with insurance and build reliable MIS (Management
Information Systems) to enforce high standards of financial soundness
amongst market players and maintain high confidentiality of data.
To take appropriate and corrective measures where such standards are
felt inadequate or remain ineffectively enforced.
To bring about optimum amount of self-regulation in day to day
working of the insurance sector consistent with the requirements of
prudential regulation.

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CHAPTER NO.4
INTRODUCTION TO AUTOMOBILE INSURANCE
Vehicle insurance (also known as auto insurance, gap insurance, car
insurance, or motor insurance) is insurance purchased for cars, trucks,
motorcycles, and other road vehicles. Its primary use is to provide
financial protection against physical damage and/or bodily injury
resulting from traffic collisions and against liability that could also arise
there from. The specific terms of vehicle insurance vary with legal
regulations in each region.
Public auto insurance is a government owned and operated system of
automobile insurance operated in the Canadian provinces of British
Columbia, Saskatchewan, Manitoba and Quebec. According to studies by
the Consumers' Association of Canada, rates charged for auto insurance
in these four provinces are lower than in provinces that use a private auto
insurance system. In Quebec public auto insurance is limited to coverage
of personal injuries while damage to property is covered by private
insurers. Saskatchewan has the oldest public auto insurance system with
Saskatchewan Government Insurance being founded in 1945. Manitoba
Public Insurance was created in 1971 followed by the Insurance
Corporation of British Columbia in 1973 and the Society de l'assurance
automobile du Qubec in 1977.
Other provinces have considered introducing a public auto insurance
system. The Ontario New Democratic Party won the 1990 provincial
election on a platform that included public auto insurance. After assuming
office, Premier Bob Rae appointed Peter Kormas, one of the most vocal
proponents of public insurance, as the minister responsible for bringing
forward the policy.
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Public auto insurance has also been considered in New Brunswick after
private insurance rates nearly doubled from 2003 to 2005, but was
ultimately rejected by the provincial government. It was also an issue in
Nova Scotia during its 2003 provincial election and remained in the
platform of the official opposition, the Nova Scotia New Democratic
Party during the 2006 election campaign. However, it did not appear in
the NDP platform in the 2009 campaign, and now that the NDP has
formed a majority government, it seems unlikely that the party will keep
its former promise to introduce a public insurance scheme. Public auto
insurance was also under consideration by the Newfoundland and
Labrador Progressive Conservative government of Danny Williams in
2004 as a "last resort" when private insurance firms threatened to pull out
of the province in response to legislation rolling back premiums.
In many jurisdictions it is compulsory to have vehicle insurance before
using or keeping a motor vehicle on public roads. Most jurisdictions
relate insurance to both the car and the driver; however the degree of each
varies greatly.
Several jurisdictions have experimented with a "pay-as-you-drive"
insurance plan which is paid through a gasoline tax (petrol tax). This
would address issues of uninsured motorists and also charge based on the
miles (kilometers) driven, which could theoretically increase the
efficiency of the insurance, through streamlined collection.

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Definition of 'Auto Insurance'

A policy purchased by vehicle owners to mitigate costs associated with
getting into an auto accident. Instead of paying out of pocket for auto
accidents, people pay annual premiums to an auto insurance company;
the company then pays all or most of the costs associated with an auto
accident or other vehicle damage.
Auto insurance premiums or the amount policyholders pay to be insured,
vary depending on: age, gender, years of driving experience, accident and
moving violation history, and other factors. Most states mandate that all
vehicle owners purchase a minimum amount of auto insurance, but many
people purchase additional insurance to further protect themselves.
A poor driving record or the desire for more complete coverage will lead
to higher premiums. However, you can reduce your premiums by
agreeing to take on more risk, which means increasing your deductible.

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HISTORY OF AUTO INSURANCE

Everyone pays for car insurance. Its so automatic that most people dont
even think about it! But how did we get to this point? Where did all this
auto insurance craziness come from? Surely there was no carinsurance at
the start of the invention of the automobile. Well, were glad you asked
because we decided to dig up the facts on where this all started from.
1866 The first automobile was invented by Richard Dudgeon in New
York City. It was built with a steam engine.
1889 The first liability insurance for a car is taken out for Dr. Truman J.
Martin. Liability insurance provides protection from claims arising from
injuries or damage to other people or property.
1908 The Ford Model T is introduced, making the automobile affordable
for most Americans and thus a popular product to own. Over 15 million
were made.
1927 The state of Massachusetts starts requiring auto insurance as a law.

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Late 1940s Most states being to adopt the same law requiring auto
insurance after a spike in postwar car purchases.

1959 In an effort to make cars safer, the Volvo 122 includes a three point
seat belt. Insurance rates for that vehicle understandably go down.
1968 President Johnson urges car insurance reform, saying the current
system is overburdened and unsatisfactory. There are over 100 million
drivers and 96 million cars on the road.
1970 The ever progressive Massachusetts passes a bill to try to limit
premiums. Insurance companies threaten to leave the state.
1972 The Nixon Administration voices support for no fault insurance.
Congress rejects a bill that would make it
a federal law requiring it.

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1973 Michigan becomes one of the first places to actually implement no

fault insurance. This means that regardless of fault, someone who is
insured is indemnified for their losses.
1974 The federal Cost of Living Council imposes a 60-day freeze on auto
insurance rate increases.
1980s Citing studies that it would make insurance rates cheaper, states
begin to enact laws requiring seatbelt usage.
1988 California passes Proposition 103, preventing massive increases in
insurance premiums.
1993 SafeAuto is founded, bringing in a new era of state minimum
insurance quality for an excellent price.

The invention of the automobile in the late nineteenth century created a

need to protect motorists from the potentially enormous financial loss

28

from operating a car. While the automobile certainly revolutionized

American society both economically and culturally, it can also be a
dangerous instrument, inflicting death, personal injury, and property
damage...and the automobile itself can also be damaged or stolen.
Economically, the potential losses associated with driving an automobile
can be significant (Stellwagen 1926). With the knowledge that operating
an automobile is potentially economically devastating, and acting on the
assumption that driving an automobile is a privilege and not a right,
policy makers required motorists to purchase auto insurance coverage to
protect innocent third parties as well as the at-fault motorist from liability.
Though car insurance obligations vary from state to state, most states in
the U.S. requires mandatory car insurance. The resulting tension between
financial responsibility and compulsory liability statutes highlights the
struggle in the American psyche itself between freedom to do what one
pleases and the need to regulate some things for the good of the whole.
Consequently, automobile insurance companies have become a leviathan
entity enmeshed with enormous political implications (Long 2007). The
history of automobile insurance gestures towards a complex interplay of
financial responsibility laws, compulsory insurance laws, and uninsured
motorist coverage based largely on the principles of tort law (Brainard
1961).

Rooted in Ancient Marine Insurance

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The concept of auto insurance is fundamentally a tort system. Tort law

falls under civil law and specifically involves personal injury laws. There
really is no agreement as to a single definition of a tort. Etymologically,
however, the term means a wrong (from the Latin tortus, twisted, to
the French tort, wrong). All torts are wrongs involving damage to a
protected interest (Braindard 1961). In other words, a tort occurs when
someone either deliberately or through negligence harms another person
or group. The concept of torts and, by extension, automobile insurance
can roughly be traced back to ancient mariners. In 3000 B.C., merchants
on Chinas rivers deliberately spread a given cargo among several ships
to reduce the potential loss due to either sinking or piracy.
In the Babylonian kingdom circa 2000 B.C., the Code of Hammurabi, one
of the first written codes of law in history, provided the first written
record of insurance in the form of bottomry. In the contract of
bottomry, lenders advanced the ship-owning merchant the full cost of
the cargo. If the voyage was a success, the ship owner repaid the bank at
a certain interest rate which included a premium to reflect the risk of loss.
If the ship was lost, the lender forgave the loan (Jaffe and Russell 1997).
Traders whose cargoes were advanced by merchants were thus protected
from debt in case the cargo was lost. This practice spread throughout the
Mediterranean region until finally the Roman edict Lex Aquilia (circa 300
B.C.) provided a general law of compensation for direct and indirect
injuries. This in turn was continued by the Roman Emperor Justinian in
the sixth century A.D. (Jorgensen 1970).

30

In addition, Greek, Indian, and Phoenician traders used an ancient

insurance called the General Average. According to a 700 B.C. written
reference, the General Average insurance involved a cooperative effort
whereby if cargo was compromised, the loss must be made good by all
interests involved: That which has been destroyed of all shall be
replaced by the contributions of all (Brainard 1961). In Europe during
the eleventh and twelfth centuries, Danish navigators began forming
guilds whose role was to protect its members against loss and damage at
sea.
Auto Insurance and Socio-Economic Infrastructures
Auto insurance evolved from the interest marine insurance had in
protecting against financial loss. The tort notion of fault is so deeply
embedded in previous theories of insurance that auto insurance naturally
also came to rest on a fault system. What this means is that if there were
an auto accident, it would be determined who was at fault and then
liability would be assessed according to that determination. However,
since there are irresponsible drivers--or, in other words, drivers who dont
have the financial capacity to pay--it is impossible to ensure that even
though fault is assessed, the injured person will be able to collect. Simply
put, the problem is that of the uncompensated drivers in a society that is
unarguably an auto-centered society (Long 2007).
The tremendous rise the automobile insurance industry is related to a
variety of factors, including the expansion of the U.S. economy, the
dramatic impact of the automobile on American life, and the rapid growth
of its supporting physical and legal infrastructure from road improvement
to driver licensing. Indeed, the rise of the car culture in the first half of
the twentieth century was accompanied by a surprising number of
accidents on the roadways (Rossi and Black Jr. 2001).
31

The high rate of accidents on the roads resulted in several political

reactions. Beginning in earnest in the early 1920s, the states and federal
government increased funds to improve roads and traffic control while
also implementing stricter driver and vehicle licensing requirements.
Insurance had always been offered to ease the socio-economic losses
associated with transportation, but now because the preferred mode of
transportation was the automobile and the number of motor vehicle
related fatalities was high, the states began to require that drivers cover
the liability they incurred while operating their cars. Perhaps the first
move by organized society to deal with the financial results of auto
accidents came with the compulsory liability insurance statue in
Massachusetts in 1927 with the objective to make all parties financially
responsible. Most states would pass similar laws by the 1940s which saw
the end of WWII and a rapid increase in the automobile industry,
consequently expanding the need for financial responsibility and
mandatory insurance coverage laws for motorists. Today all states require
automobile insurance.
Auto insurance has become one of the most heavily regulated businesses
in U.S. history, and most countries outside the United States also now
require motorists to purchase auto insurance before driving on public
roads. The penalties for not acquiring insurance can be severe. Usually,
the law requires that a motorist have at least third-party insurance to
protect others against financial loss caused by the motorist's vehicle,
while coverage against damage to the motorist's own vehicle or person is
usually optional. In doing this, American insurance laws created an auto
accident compensation system based on personal responsibility that
simply extended traditional insurance legal principles embodied in tort
law to a new technology: the auto (Long 2007).
32

Person Needfull For Auto Insurance

Everybody. Well, almost everybody. 49 states and the District of
Columbia require drivers to carry at least minimal auto insurance, but
states individually decide what that means. New Hampshire is the only
state that doesn't require drivers to have auto insurance, but NH drivers
have to financially prove that they can cough up cash if they cause an
accident. Drivers everywhere except New Hampshire are required to
carry liability insurance, which pays for any injuries caused to the other
party in an accident that's your fault. It also covers repairs and property
damage for them, not for you.
On top of liability coverage, certain states also require you to purchase
uninsured motorist coverage, which protects you if you're in an accident
with someone who isn't insured. Some states also require Personal Injury
Protection (PIP) which pays medical expenses and can cover other costs
like lost wages, child care andset phasers to "morbid"burial fees.
Bodily injury liability and property damage liability are the basic legal
requirements along with PIP and/or uninsured motorist coverage if your
state requires it. With their powers combined, those things will cover
damage to your body, the other party's body, their vehicles and property.
Minimum auto insurance will not cover damage to your own car in a
wreck. Ironically, you usually have to purchase more car insurance to
cover your own car. Funny how that works isn't it? Adding extras like
comprehensive and collision coverage can turn your paltry minimum
policy into an impenetrable insurance force field. You can also add on
coverage for theft, extended warranty protection and rental car
reimbursement to save fiscal hassle in the future, but you'll pay more for
them.

33

Need For Auto Insurance

How much insurance you'll need is THE question and it's a toughie. How
much liability insurance you're required to carry varies by state. Each
state has three minimum insurance requirementsone that dictates the
amount your insurance has to provide per person injured in an accident,
the amount provided to cover all injuries in an accident and the amount
provided to cover property damage caused by a car crash.
Oregon, for example, requires that drivers carry enough insurance to pay
each person injured in a crash up to $25,000 with a maximum injury
coverage of $50,000. Drivers also must carry at least $20,000 in
insurance to cover property damage. In insurance jargon, these minimums
would be listed as 25/50/20. (A full list of each state's minimum liability
requirements is available here).
We hate to break it to you, but buying minimum coverage is kind of like
getting a D-. Yeah, you can pass, but only by the skin of your teeth.
Damage from significant car crashes can easily top $100,000, making
your dinky 25/50/20 policy look like a Smurf in a bear fight.
How much liability and PIP protection you personally will need gets very
complicated very quickly and it's all very personal. The type of vehicle
you have, your driving record, your family's financial situation, how
much you can afford, the type of insurance policy you buy and where you
buy it from will all be factors. Someone with a brand new 4Runner and a
tendency to hit a few mailboxes while peeling out of the neighborhood
will probably need more insurance than the kid in the clunker from the
80s who's terrified to go 5 over the speed limit.

34

Total Cost
How auto insurance providers arrive at your final price is a mystery of
almost Da Vinci Code proportions. Every company has its own formula
and no one will share it.
What all auto insurance providers have in common is that how much your
monthly premiums cost will largely depend on your deductible. Your
deductible is the amount you pay if you're involved in an accident before
your insurance kicks in. If, for example, you wreck your ride and have a
$1,000 deductible, you'll have to fork over a cool grand before your
insurance will pay a dime. The higher your deducible, the lower your
monthly premiums and vice versa.
Deductibles are only one of several things that factor into how much
you'll pay for insurance. Even if your parents have the same deductible as
you, their insurance will probably still cost substantially less because
they're older. It's not fair, it's just the way the game is played.
The type and condition of the car you drive, your age, gender, how
frequently you drive, your driving history and in many states, your credit
score play a part in determining your monthly auto insurance bill.
Students can typically get discounts of up to 25 percent for practicing
safe driving habits and maintaining good grades. College students
frequently get an additional break if they attend a college that's at least
100 miles away and don't take a car. Since insurance providers each have
their own formula for tabulating premium price and insurance discounts,
shopping around is crucial. Way crucial.

35

What To Do Now...
Your brain is swimming with questions right? What happens if your car is
stolen? Will you be covered if you need to rent a vehicle? If you're in a
wreck, will your insurance company just mail you a check? How will you
file a claim?
It's complicated because auto insurance policies are like snowflakesno
two policies are exactly the same. Different policies handle issues like
payouts when an accident isn't your fault, whether rental cars are covered
and the process for filing claims completely differently.

Types of Automobile Insurance

The many different types of policies, along with unfamiliar legal
terminology, can initially be confusing (Rossi and Black 2001). There are
five basic types of auto insurance coverage: bodily injury liability,
property damage liability, medical payment liability, uninsured motorist
liability, and collision and comprehensive coverage.
Bodily Injury Liability
Provides coverage for bodily injury claims from those whom a motorist
injures in an accident. In other words, this covers motorists if they are at
fault in an accident and the people in the other vehicle suffer injuries
exceeding their own personal injury coverage.

36

Property Damage Liability

Covers any property damages to third parties (such as damage to the other
persons car or other personal property which a motorist causes or is
responsible for). Damage liability provides a fixed dollar amount of
coverage for damages that an insured driver becomes legally liable to pay
due to an accident or other negligence. The most important type of
coverage provided by automobile insurers is the liability coverage.
Liability premiums are higher and bring in more money than other
coverage, and companies claims losses are greatest in this area because
the law tends to value lives more than property (Rossi and Black 2001).
Medical Payments Liability
Provides medical payments to the policy owner and other passengers in
the policy owners car.

Uninsured Motorist Liability

Protects a motorist when the other, negligent driver has no insurance or
not enough insurance. Uninsured motorist insurance is meant only to
cover bodily injury and not property damage. It means that the insured is
really double-insured both against his own injury and also injury
caused by an uninsured motorist. The amount of coverage that a
purchaser of automobile insurance could secure against the acts of an
uninsured motorist is the amount required under the financial
responsibility laws of the insured's state. State law determines the
definition of uninsured/underinsured and the corresponding coverages.

37

Collision and Comprehensive Coverage

Insures against physical damage to a motorists car, including collision
and comprehensive coverage. Collision covers damage to the insureds
car that is involved in an accident. Usually collision coverage includes a
deductible and provides payments to repair the damaged vehicle or
payments of the cash value of the car if the car is not repairable. Collision
coverage is usually optional. Comprehensive coverage provides coverage
minus a deductible for damage not considered collision, such as theft,
fire, weather, or impact with an animal (Automobile Insurance 2001).

Today, anybody and everybody, has insurance of some sort. Either they
believe in insuring themselves and their loved ones, or in insuring their
vehicles! In India and in most other places, vehicle insurance is
mandatory. The amount your vehicle can be insured for varies depending
on the insurance companies and the insurance brokers.
In India, there are several types of vehicle insurances. Companies in India
offer insurance at four levels.
1.Fully comprehensive vehicle insurance- This is by far the most
expensive insurance, yet the most common type, as it covers all the
possible damages and costs that your vehicle may incur. This type of
vehicle insurance proves to be advantageous as there is no need to
produce proof of the damage to claim the insurance amount. Thus, if your
vehicle is damaged or stolen in your absence, then you can still approach
the insurance company.

38

2.Third Party insurance- This type of insurance carries a comparatively

cheaper premium and insures against damages and legal claims when you
are at fault and have hit a third party. The insurance company is not
responsible for any other scratches or occurring that takes place with your
car.
3.Specialized car insurance- This type of insurance refers to any car that
is over 25 years old, as vintage cars have different needs and
requirements. Similar to a comprehensive auto insurance policy, the only
difference between the two is that you are limited to an x amount of miles
in a given year.

4.Third Party Fire and Theft insurance- Befitting to its name, this
insurance covers the costs of your vehicle in case of fire, theft, accident,
etc. However, in case of an accident, the insurance company will only pay
up if you are at fault and have hit another car and not vice-versa.

In order to go forward with insuring your car, you need to carefully go

through the various schemes offered by different insurance brokers. Each
insurance broker has a scheme that offers one policy better than the other.
A way of going about the entire process would be to patiently go through
all the possible offers, look out for the best premium offered and then
insure your vehicle. Today, online access to insurance schemes makes the
process a whole lot easier. Under Creative Commons License: Attribution
No Derivatives

39

CHAPTER NO.5
SCOPE OF AUTOMOBILE INSURANCE IN INDIA
Auto insurance coverage protects you from bearing the economic loss in
case of an accident, but you are required to pay premiums monthly to
keep the insurance. By law it truly is compulsory to have car insurance
coverage if youd like to drive on the road and without it you are able to
be fined, shed your license, visit jail and also be sued depending on the
accident you brought on.
Auto insurance has several distinct varieties of policies and coverage so
you will need to ensure, when you acquire auto insurance. A single thing
is for confident that the monthly premium will fit along with your
budget and also that the quantity will likely be appropriate. There is a
very delicate line between the two and youll need to have to determine
that is suitable for your vehicles.
Suppose you had a car accident due to the fact of the fault then youll
need to put the claim by way of your insurance coverage. This implies
that your insurance coverage firm will pay the damages for the vehicles
and also the medical expenditures. With out auto insurance its
important to bear the loss for the damages and all medical bills. Youll
be able to be punished for injuring somebody in an accident without
having any insurance. This will frequently result in a massive loss.
Car insurance can be a really severe matter and 1 with the most
significant policies. Its also a single of the insurance policies which can
be essential to have while driving on road. Car insurance coverage is
very important in case somebody hits your car. If an individual hits the
vehicle without having insurance coverage then it might be a heavy loss.
40

Because it might be mentioned, having auto insurance coverage benefits

you in a lot and also provides you a feeling of security. We must
constantly drive focused and not to be in a fear regarding the reality you
are driving without having insurance. Vehicle insurance can be
purchased at extremely cost-effective prices and offers a terrific
comfort. Theres highly competitive competition in this market and
there are various businesses fighting for this upcoming enterprise.
1 should go in for knowledgeable businesses as they may be a lot more
dependable than new ones. The older the company the better is the
facility they provided as their expertise assists them diverse clients and
they may be conscious of all the issues and solutions. A lot of
individuals can form a group to buy a typical insurance coverage. There
are many ways of selecting good policy. Each of the pros as well as the
cons need to be weighed prior to creating selection.

41

CHAPTER NO.6
AUTOMOBILE INSURANCE COMPANIES IN INDIA
Royal Sundaram Alliance Insurance Co. Ltd
TATA AIG General Insurance Co. Ltd.
The Oriental Insurance Co. Ltd.

Auto Insurance
Auto Insurance
Private Car Package Policy
Motor Cycle Package Policy

HDFC ERGO General Insurance Co. Ltd

Auto Insurance

Reliance General Insurance Co. Ltd.

Private Car Comprehensive

Two Wheeler Comprehensive

Bajaj Allianz General Insurance Co. Ltd.

Auto Insurance

IFFCO TOKIO General Insurance Co. Ltd.

Motor Private Car

Motor Cycle/Scooter

United India Insurance Co. Ltd

Auto Insurance

National Insurance Co. Ltd.

Motor Policy - Two Wheeler

Motor Policy - Private Car

Future Generali India Insurance Co. Ltd.

The New India Assurance Co. Ltd

Auto Insurance
Rasta Aapatti Kavach
Motor Policy

ICICI Lombard General Insurance Co. Ltd.

42

Private Vehicle Insurance

CHAPTER NO.7
POLICY OFFERED UNDER AUTOMOBILE INSURNCE
IN INDIA

UNITED INDIA INSURANCE CO.LTD.

Private Car Package Policy
Whereas the insured by a proposal and declaration dated as stated in the
Schedule which shall be the basis of this contract and is deemed to be
incorporated herein has applied to the Company for the insurance
hereinafter contained and has paid the premium mentioned in the
schedule as consideration for such insurance in respect of accidental loss
or damage occurring during the period of insurance.
Now This Policy Witnesseth:
That subject to the Terms Exceptions and Conditions contained herein or
endorsed or expressed hereon;
Section I. Loss Of Or Damage To The Vehicle Insured
1. The Company will indemnify the insured against loss or damage to the
vehicle insured hereunder and / or its accessories whilst thereon
i. by fire explosion self ignition or lightning ;
ii. by burglary housebreaking or theft ;
iii. by riot and strike;
iv. by earthquake (fire and shock damage);

43

v. by flood typhoon hurricane storm tempest inundation cyclone hailstorm

frost;
vi. by accidental external means;
vii. by malicious act;
viii. by terrorist activity;
ix. whilst in transit by road rail inland-waterway lift elevator or air;
x. by landslide rockslide.
Subject to a deduction for depreciation at the rates mentioned below
in respect of parts replaced :
(1) For all rubber/ nylon / plastic parts, tyres and tubes, batteries and air
bags - 50%
(2) For fiber glass components - 30%
(3) For all parts made of glass - Nil
(4) Rate of depreciation for all other parts including wooden parts will be
as per the following schedule.

44

AGE OF VEHICLE

% OF DEPRECIATION

Not exceeding 6 months.

Nil

Exceeding 6 months but not exceeding 1

5%

year.
Exceeding 1 year but not exceeding 2

10%

years.
Exceeding 2 years but not exceeding 3

15%

years.
Exceeding 3 years but not exceeding 4

25%

years.
Exceeding 4 years but not exceeding 5

35%

years.
Exceeding 5 year but not exceeding 10

40%

years.
Exceeding 10 years.

50%

2. The Company shall not be liable to make any payment in respect of :(a) consequential loss, depreciation, wear and tear, mechanical or lectrical
breakdown, failures or breakages;
(b) damage to tyres and tubes unless the vehicle is damaged at the same
time in which case the liability of the company hall be limited to 50% of
the cost of replacement. and
(c) any accidental loss or damage suffered whilst the insured or any
person driving the vehicle with the knowledge and consent of the insured
is under the influence of intoxicating liquor or drugs.
3. In the event of the vehicle being disabled by reason of loss or damage
covered under this Policy the Company will bear the reasonable cost of

45

protection and removal to the nearest repairer and redelivery to the

insured but not exceeding in all Rs. 1500/- in respect of any one accident.
The insured may authorize the repair of the vehicle necessitated by
damage for which the Company may be liable under this
Policy provided that:
a) the estimated cost of such repair including replacements, if any, does
not exceed Rs.500/-;
b) the Company is furnished forthwith with a detailed estimate of the cost
of repairs; and
c) the insured shall give the Company every assistance to see that such
repair is necessary and the charges are reasonable.
Sum Insured - Insureds Declared Value (Idv)
The Insureds Declared Value (IDV) of the vehicle will be deemed to be
the SUM INSURED for the purpose of this policy which is fixed at the
commencement of each policy period for the insured vehicle.
The IDV of the vehicle (and accessories if any fitted to the vehicle) is to
be fixed on the basis of the manufacturers listed selling price of the
brand and model as the vehicle insured at the commencement of
insurance/renewal and adjusted for depreciation (as per schedule below).
The schedule of age-wise depreciation as shown below is applicable for
the purpose of Total Loss/Constructive Total Loss (TL/CTL) claims only.

The Schedule Of Depreciation For Fixing Idv Of The Vehicle

AGE OF THE

% OF

AGE OF THE
46

% OF

VEHICLE

DEPRECIATION VEHICLE

DEPRECIATION

Not exceeding

5%

30%

Exceeding 2

6 months

years but not

exceeding

Exceeding 6

15%

Exceeding 3

months but not

years but not

exceeding 1

exceeding

40%

year
Exceeding 1

20%

Exceeding 4

year but not

50%

years but not

exceeding

exceeding 2
years

5 years

IDV of vehicles beyond 5 years of age and of obsolete models of the

vehicles ( i.e. models which the manufacturers have discontinued to
manufacture) is to be determined on the basis of an understanding
between the insurer and the insured. IDV shall be treated as the Market
Value throughout the policy period without any further depreciation for
the purpose of Total Loss (TL) / Constructive Total Loss (CTL) claims.
The insured vehicle shall be treated as a CTL if the aggregate cost of
retrieval and / or repair of the vehicle, subject to terms and conditions of
the policy, exceeds 75% of the IDV of the vehicle.

Section Ii - Liability To Third Parties

1. Subject to the limits of liability as laid down in the Schedule hereto the
Company will indemnify the insured in the event of an accident caused
47

by or arising out of the use of the vehicle against all sums which the
insured shall become legally liable to pay in respect of :death of or bodily injury to any person including occupants carried
in the vehicle (provided such occupants are not
carried for hire or reward) but except so far as it is necessary to meet the
requirements of Motor Vehicles Act, the
Company shall not be liable where such death or injury arises out of and
in the course of the employment of such
person by the insured.
damage to property other than property belonging to the insured or
held in trust or in the custody or control of the insured.
2. The Company will pay all costs and expenses incurred with its written
consent.
3. In terms of and subject to the limitations of the indemnity granted by
this section to the insured, the Company will indemnify any driver who is
driving the vehicle on the insured's order or with insureds permission
provided that such driver shall as though he/she was the insured observe
fulfill and be subject to the terms exceptions and conditions of this Policy
in so far as they apply.

4. In the event of the death of any person entitled to indemnity under this
policy the Company will in respect of the liability incurred by such
person indemnify his/her personal representative in terms of and subject
to the limitations of this Policy provided that such personal representative
48

shall as though such representative was the insured observe fulfill and be
subject to the terms exceptions and conditions of this Policy in so far as
they apply.
5. The Company may at its own option
(A) Arrange for representation at any Inquest or Fatal Inquiry in respect
of any death which may be the subject of indemnity under this Policy and
(B) Undertake the defence of proceedings in any Court of Law in respect
of any act or alleged offence causing or relating to any event which may
be the subject of indemnity under this Policy.
Avoidance Of Certain Terms And Right Of Recovery
Nothing in this Policy or any endorsement hereon shall affect the right of
any person indemnified by this Policy or any other person to recover an
amount under or by virtue of the provisions of the Motor Vehicles Act.
But the insured shall repay to the Company all sums paid by the
Company which the Company would not have been liable to pay but for
the said provisions.

Application Of Limits Of Indemnity

In the event of any accident involving indemnity to more than one person
any limitation by the terms of this Policy and/or of any Endorsement
thereon of the amount of any indemnity shall apply to the aggregate
49

amount of indemnity to all persons indemnified and such indemnity shall

apply in priority to the insured.
Section Iii - Personal Accident Cover For Owner-Driver
1) The Company undertakes to pay compensation as per the following
scale for bodily injury/ death sustained by the owner driver of the vehicle,
in direct connection with the vehicle insured or whilst driving or
mounting into/dismounting from the vehicle insured or whilst traveling in
it as a co-driver, caused by violent accidental external and visible means
which independent of any other cause shall within six calendar months of
such injury result in:
Nature of

Scale of

Injury

Compensation

0. Death

100%

Nature of Injury

Scale of
Compensation

iii) Loss of one

50%

limb or sight of
one eye
1. Loss of two

100%

iv) Permanent

limbs or sight of

Total Disablement

two eyes or one

from

limb and sight of

injuries other than

one eye

named above

100%

Provided always that

A) compensation shall be payable under only one of the items (i) to (iv)
above in respect of the owner-driver arising out of any one occurrence
and the total liability of the insurer shall not in the aggregate exceed the
sum of Rs. 2 lakhs during any one period of insurance.

50

B) no compensation shall be payable in respect of death or bodily injury

directly or indirectly wholly or in part arising or resulting from or
traceable to
(1) intentional self injury suicide or attempted suicide physical defect or
infirmity or
(2) an accident happening whilst such person is under the influence of
intoxicating liquor or drugs.
C) Such compensation shall be payable directly to the insured or to
his/her legal representatives whose receipt shall be the full discharge in
respect of the injury to the insured.
2) This cover is subject to
(a) the owner-driver is the registered owner of the vehicle insured herein;
(b) the owner-driver is the insured named in this policy.
(c) the owner-driver holds an effective driving license, in accordance with
the provisions of Rule 3 of the Central Motor Vehicles Rules, 1989, at the
time of the accident

General Exceptions (Applicable To All Sections Of The Policy)

The Company shall not be liable under this Policy in respect of
1. any accidental loss or damage and/or liability caused sustained or
incurred outside the geographical area;

51

2. any claim arising out of any contractual liability;

3. any accidental loss damage and/or liability caused sustained or
incurred whilst the vehicle insured herein is
(a) being used otherwise than in accordance with the Limitations as to
Use or
(b) being driven by or is for the purpose of being driven by him/her in the
charge of any person other than a
Driver as stated in the Driver's Clause.
4. (a) Any accidental loss or damage to any property whatsoever or any
loss or expense whatsoever resulting or arising there from or any
consequential loss
(b) any liability of whatsoever nature directly or indirectly caused by or
contributed to by or arising from ionizing radiations or contamination by
radioactivity from any nuclear fuel or from any nuclear waste from the
combustion of nuclear fuel. For the purpose of this exception combustion
shall include any self-sustaining process of nuclear fission.
5. Any accidental loss or damage or liability directly or indirectly caused
by or contributed to by or arising from nuclear weapons material.

Any accidental loss damage and/or liability directly or indirectly or

proximately or remotely occasioned by contributed to by or traceable to
or arising out of or in connection with war, invasion, the act of foreign
enemies, hostilities or warlike operations (whether before or after
declaration of war) civil war, mutiny rebellion, military or usurped power
or by any direct or indirect consequence of any of the said occurrences

52

and in the event of any claim hereunder the insured shall prove that the
accidental loss damage and/or liability arose independently of and was in
no way connected with or occasioned by or the Company shall not be
liable to make any payment in respect of such a claim.
Deductible
The Company shall not be liable for each and every claim under Section I (loss of or damage to the vehicle insured) of this Policy in respect of the
deductible stated in the schedule.
Conditions
This Policy and the Schedule shall be read together and any word or
expression to which a specific meaning has been attached in any part of
this Policy or of the Schedule shall bear the same meaning wherever it
may appear.
1. Notice shall be given in writing to the Company immediately upon the
occurrence of any accidental loss or damage in the event of any claim and
thereafter the insured shall give all such information and assistance as the
Company shall require. Every letter claim writ summons and/or process
or copy thereof shall be forwarded to the Company immediately on
receipt by the insured.
Notice shall also be given in writing to the Company immediately the
insured shall have knowledge of any impending prosecution, inquest or
fatal inquiry in respect of any occurrence which may give rise to a claim
under this Policy. In case of theft or criminal act which may be the
subject of a claim under this Policy the insured shall give immediate
notice to the police and co-operate with the Company in securing the
conviction of the offender.

53

2. No admission offer promise payment or indemnity shall be made or

given by or on behalf of the insured without the written consent of the
Company which shall be entitled if it so desires to take over and conduct
in the name of the insured the defence or settlement of any claim or to
prosecute in the name of the insured for its own benefit any claim for
indemnity or otherwise and shall have full discretion in the conduct of
any proceedings or in the settlement of any claim and the insured shall
give all such information and assistance as the Company may require.
3. The Company may at its own option repair reinstate or replace the
vehicle or part thereof and/or its accessories or may pay in cash the
amount of the loss or damage and the liability of the Company shall not
exceed:
a. for total loss / constructive total loss of the vehicle - the Insured's
Declared Value (IDV) of the vehicle (including accessories thereon) as
specified in the Schedule less the value of the wreck.
b. for partial losses, i.e. losses other than Total Loss/Constructive Total
Loss of the vehicle actual and reasonable costs of repair and/or
replacement of parts lost/damaged subject to depreciation as per limits
specified.
4. The insured shall take all reasonable steps to safeguard the vehicle
from loss or damage and to maintain it in efficient condition and the
Company shall have at all times free and full access to examine the
vehicle or any part thereof or any driver or employee of the insured. In
the event of any accident or breakdown, the vehicle shall not be left
unattended without proper precautions being taken to prevent further
damage or loss and if the vehicle be driven before the necessary repairs

54

are effected any extension of the damage or any further damage to the
vehicle shall be entirely at the insured's own risk.
5. The Company may cancel the policy by sending seven days notice by
recorded delivery to the insured at insureds last known address and in
such event will return to the insured the premium paid less the pro rata
portion thereof for the period the Policy has been in force or the policy
may be cancelled at any time by the insured on seven days notice by
recorded delivery and provided no claim has arisen during the currency of
the policy, the insured shall be entitled to a return of premium less
premium at the Company's Short Period rates for the period the Policy
has been in force. Return of the premium by the company will be subject
to retention of the minimum premium of Rs.100/- (or Rs.25/- in respect
of

vehicles

specifically

designed/modified

for

use

by

blind/handicapped/mentally challenged persons). Where the ownership of

the vehicle is transferred, the policy cannot be cancelled unless evidence
that the vehicle is insured elsewhere is produced.
6. If at the time of occurrence of an event that gives rise to any claim
under this policy there is in existence any other insurance covering the
same liability, the Company shall not be liable to pay or contribute more
than its ratable proportion of any compensation, cost or expense.
7. If any dispute or difference shall arise as to the quantum to be paid
under this policy (liability being otherwise admitted), such difference
shall independent of all other questions be referred to the decision of a
sole arbitrator to be appointed in writing by the parties to the dispute or if
they cannot agree upon a single arbitrator within 30 days of any party
invoking Arbitration, the same shall be referred to a panel of three
arbitrators comprising two arbitrators one to be appointed by each of the

55

parties to the dispute / difference, and a third arbitrator to be appointed by

such two arbitrators who shall act as the presiding arbitrator and
Arbitration shall be conducted under and in accordance with the
provisions of the Arbitration and Conciliation Act, 1996. It is clearly
agreed and understood that no difference or dispute shall be referable to
Arbitration as hereinbefore provided, if the Company has disputed or not
accepted liability under or in respect of this policy. It is hereby expressly
stipulated and declared that it shall be condition precedent to any right of
action or suit upon this policy that the award by such arbitrator/
arbitrators of the amount of the loss or damage shall be first obtained.

TATA AIG GENERAL INSURANCE

Private Car Insurance
Your car is not only a high value asset but also a highly valued
possession. Therefore, it becomes crucial to insure your valuable
possession. In todays times you need a comprehensive policy that not
only covers you against the mandatory third party liability but also

56

against the losses caused due to fire, theft, explosion, burglary, riots,
strikes, earthquakes, flood, cyclones, accidents, malicious acts and
terrorist activities.
Auto Secure, value added car insurance from Tata AIG, has been
designed to give you the extra assurance and peace of mind. Thats not
all, through our 8 unique add on covers, you can enhance your standard
car insurance policy.
Insurance Coverage
Loss or Damage to your Vehicle: Any partial or total loss to your
vehicle arising out of accident or on account of fire and allied perils is
covered.
Third Party Legal Liability: Covers Third party property damage and
Third party Bodily injury
No deduction on count of Salvage value
Green Channel Settlement: Green Channel Settlement is another first in
the motor insurance industry. This innovation promises to make accident
claims and repairs easier than never before! You get value added
propositions through our accredited garages
Auto Restore Warranty: Tata AIG Auto Secure policyholders can enjoy
'Warranty on Accident Repairs' when a customer opts for the 'Green
Channel Settlement
Insurance Not Covered
The Company shall not be liable under this Policy in respect of
1. any accidental loss or damage and/or liability caused sustained or
incurred outside the geographical area;
57

2. any claim arising out of any contractual liability;

3. any accidental loss damage and/or liability caused sustained or
incurred whilst the vehicle insured herein is
(a) being used otherwise than in accordance with the Limitations as to
Use or
(b) being driven by or is for the purpose of being driven by him/her in the
charge of any person other than a Driver as stated in the Driver's Clause.
4. (i) Any accidental loss or damage to any property whatsoever or any
loss or expense whatsoever resulting or arising there from or any
consequential loss
(ii) any liability of whatsoever nature directly or indirectly caused by or
contributed to by or arising from ionizing radiations or contamination by
radioactivity from any nuclear fuel or from any nuclear waste from the
combustion of nuclear fuel. For the purpose of this exception combustion
shall include any self-sustaining process of nuclear fission.
5. Any accidental loss or damage or liability directly or indirectly caused
by or contributed to by or arising from nuclear weapons material.
6. Any accidental loss damage and/or liability directly or indirectly or
proximately or remotely occasioned by contributed to by or traceable to
or arising out of or in connection with war, invasion, the act of foreign
enemies, hostilities or warlike operations (whether before or after
declaration of war) civil war, mutiny rebellion, military or usurped power
or by any direct or indirect consequence of any of the said occurrences
and in the event of any claim hereunder the insured shall prove that the
accidental loss damage and/or liability arose independently of and was in
no way connected with or occasioned by or contributed to by or traceable
58

to any of the said occurrences or any consequences thereof and in default

of such proof, the Company shall not be liable to make any payment in
respect of such a claim.
7. The Company shall not be liable for each and every claim under
Section I (Loss of or damage to the vehicle insured) of this policy in
respect of the deductible stated in the schedule.$
8. The Company shall not be liable to make any payment in respect of:
i) Consequential loss, depreciation, wear and tear, mechanical or
electrical breakdown, failure or breakages;
ii) Damages to Tires and Tubes unless the vehicle is damaged at the same
time in which case the liability of the company shall be limited to 50% of
the cost of replacement and
iii) Any accidental loss or damage suffered whilst the Insured or any
person driving the vehicle with the knowledge and consent of the Insured
is under the influence of intoxicating liquor or Drugs.

BAJAJ ALLIANZ GENERAL INSURANCE

Car insurance or two wheeler insurance by Bajaj Allianz provides
unmatched care and protection for your motoring experience.
Whether it is cashless settlement in preferred workshops or 24x7 claims
support, our insurance plan for your car and two wheeler has been
designed with hassle-free claim settlement experience in mind.
Features

59

Instant online policy issuance and renewal in just 4 easy steps

Cashless claims at over 1500 preferred garages. 75% on account
payment when cashless facility is not available
To locate a Bajaj Allianz Preferred Garage nearest to you call us at:
1800 233-3355 (Toll Free).
Transfer your existing No Claim Bonus from any insurance provider
ranging from 20% - 50%
0% interest EMI option available on payment through Citibank Credit
Card
Instant claims assistance and SMS updates on your motor claim status
through our 24x7 call-centers
Towing facility in an event of a breakdown/accident 24x7 service by
phone or online-even on holidays
Bajaj Allianz' preferred workshops give you access to hassle free
inspection, high service standards and cashless settlement of claims in
event of an accident/breakdown

COVERAGE
Loss or Damage to your car and two wheeler against Natural
Calamities
Fire, explosion, self-ignition or lightning, earthquake, flood, typhoon,
hurricane, storm, tempest, inundation, cyclone, hailstorm, frost, landslide
and rockslide.

60

Loss or Damage to your car and two wheeler against Man-made

Calamities
Burglary, theft, riot, strike, malicious act, accident by external means,
terrorist activity, any damage in transit by road, rail, inland waterway, lift,
elevator or air.
Personal Accident Cover
Coverage of Rs. 1 Lakh for the individual owner/driver of the vehicle
while driving or traveling, mounting or dismounting from the two
wheeler. Optional personal accident covers for co-passengers available.
Third Party Legal Liability
Protection against legal liability due to accidental damages resulting in
the permanent injury or death of a person, and damage caused to the
surrounding property.

NOT COVERED
Normal wear and tear and general ageing of the vehicle
Depreciation or any consequential loss
Mechanical/ electrical breakdown

61

Wear and tear of consumables like tyres and tubes unless the vehicle is
damaged at the same time, in which case the liability of the company
shall be limited to 50% of the cost of replacement
Vehicles being used otherwise than in accordance with limitations as to
use
Damage to/ by a person driving any vehicles without a valid license
Damage to/ by a person driving the vehicle under the influence of drugs
or liquor. Loss/ damage due to war, mutiny or nuclear risk

NEW INDIA ASSURANCE COMPANY LTD

This policy covers all types of vehicles plying on public roads.
Highlights
This policy covers all types of vehicles plying on public roads such as:62

Scooters & Motorcycles

Private cars
All types of commercial vehicles
Motor Trade (vehicles in show rooms and garages)
As per the Motor Vehicles Act, 1988 it is mandatory for every owner of a
vehicle plying on public roads, to take an insurance policy, to cover the
amount, which the owner becomes legally liable to pay as damages to
third parties as a result of accidental death, bodily injury or damage to
property. A Certificate of Insurance must be carried in the vehicle as a
proof of such insurance.
Two types of covers are available:
1.Liability only policy. This covers third party liability for bodily injury
liability and / or death and property damage. Personal Accident cover for
Owner-driver is also included.
2.Package policy. This cover loss or damage to the vehicle insured in
addition to (1) above.
No- claim discounts are available on renewal of policy, ranging from 20%
to 50%, depending upon the type of vehicle and the number of years for
which no claim has been made.
SCOPE
Liability Only policies:
The policy covers the vehicle owner's legal liability to pay compensation
for:
1.Death or bodily injury to a third party person.
63

2.Damage to third party property.

Liability is covered for an unlimited amount in respect of death or injury
and damage to third party property for Rs.7.5 lacs under Commercial
vehicle and private and Rs. 1 lakh for Scooters / Motor Cycles.
Package Policy
In addition to the coverage under liability only, this policy covers loss or
damage to the insured vehicle and its accessories due to:
1.Fire, explosion, self-ignition or lightning.
2.Burglary, housebreaking or theft.
3.Riot and Strike.
4.Malicious Act.
5.Terrorist Act.
6.Earthquake (Fire and Shock) Damage.
7.Flood, Typhoon, Hurricane, Storm, Tempest, Inundation, Cyclone.
8.Accidental external means.
9.Whilst in transit by road, inland waterway, lift, elevator or air.
10.By landslide/Rockslide
The policy also pays for towing charges from the place of accident to the
workshop upto a maximum limit of Rs.300/- for Scooters/Motorcycles
and Rs.1500/- for cars and commercial vehicles. It is also permissible to
opt for higher towing charges subject to payment of extra premium.
A restricted cover is also available covering the risk of Fire and/or Theft
only, in addition to the compulsory cover granted under "Liability Only
64

Policy". However the same is not available in case of vehicle ratable

under Class D, Tariff for Miscellaneous and special types of vehicles.
The important exclusions under the policies are:
Wear and tear, breakdowns
Consequential loss
Loss when driving with invalid driving license or under the influence of
alcohol.
Loss due to war, civil war, etc.
Claims arising out of contractual liability.
Use of vehicle otherwise than in accordance with `limitations as to use '
(e.g. private car being used as a taxi)
Rating factors
Rating depends upon the following factors:
1.IDV.
2.Cubic capacity
3.Geographical zone
4.Age of the vehicle
5.GVW of in case of commercial vehicles
6.Add on Covers
Add on covers
The policy can be extended to cover the following risks on payment of
additional premium:
65

1.Loss or damage to accessories fitted in the vehicle such as stereos, fans,

air-conditioners etc.
2.Personal accident cover under private car policies for:
passengers
paid driver
3.Legal liability to employees.
4.Legal liability to non-fare paying passengers in commercial vehicles.
Select the sum insured?
The sum insured of a vehicle in a Motor Policy is referred to as the
I.D.V., which stands for Insured's declared Value.

In case of theft of vehicle or if the vehicle is totally damaged and beyond

repairs in an accident, the claim amount payable will be determined on
the basis of the IDV. The IDV of the vehicle is to be fixed on the basis of
manufacturer's listed selling price of the brand and model of the vehicle
proposed for insurance at the commencement of insurance / renewal and
adjusted for depreciation as per schedule.

IDV of vehicle which is beyond 5 years of age and of obsolete models of

the vehicles (i.e. models which the manufacturers have discontinued to
manufacture) is to be determined on the basis of an understanding
between insurer and insured.
Claims

66

In the event of an incident giving rise to a claim under the policy, the
following steps should be taken:
In case of accidental damage to the vehicle:
1.Immediate intimation to the nearest office, which will issue a Claim
Form.
2.Claim Form duly filled in to be submitted along with copy of
Registration Certificate and driving license of the driver of the vehicle at
the time of accident as also estimate of repairs.
3.Vehicle will be surveyed by a Surveyor, appointed by the insurance
company, who shall submit his report to the company. In case of a major
damage to the vehicle, a spot survey, at the site of accident, would also be
arranged by the company.
4.Final bills/cash memos are to be submitted duly signed by the insured.
5.Salvage of the damaged parts may be required to be deposited with the
insurance company after approval of the claim.

In case of theft of the vehicle:

1.Lodge an F.I.R. with the police immediately.
2.Inform the policy issuing office with a copy of FIR.
3.Submit the Final Police Report as soon as it is received.
67

4.Extend full cooperation to the surveyor and/or investigator appointed by

the company.
5.After approval of the claim by the company, get the Registration
Certificate transferred in the name of the company, hand over the keys of
the vehicle, submit a letter of Subrogation and Indemnity on stamp paper
duly notarized.
In case of liability claim:
1.Inform insurance company immediately of any incident likely to give
rise to liability claim.
2.On receipt of summons from Court, the same should be sent to the
company immediately.
3.Claim Form duly filled in along-with copies of Registration Certificate,
Diving License, FIR are to be submitted.

FUTURE

GENERALI

GENERAL

COMPANY
The difference between driving safe and driving secure.

68

INSURANCE

You stop at every signal; you slow down when you are supposed to, and
follow every rule to the letter. Unfortunately, your vehicles fate doesnt
depend on you alone. Future Motor Suraksha takes care of any damage
your vehicle might suffer. This plan, which is in its first year of
operations; over everything, including third party expenses. So now when
you drive, rest assured; we take just as much care of your car as we do of
you.
Private Car Insurance
Coverages
Vehicle damage: This benefit covers any damage to your vehicle on
account of an accident, burglary, theft or housebreaking. It also protects
your vehicle against damage due to fire, lightning, self-ignition,
explosion, riot, strike, malicious act, terrorism, earthquake, flood, cyclone
and inundation. This cover encompasses protection against any damage
caused to your vehicle while in transit by road, rail, air, elevator and lift
Third party liability: This benefit protects you against any third party
liability that you may incur due to the death of, or bodily injury to, any
person; or damage to property. The policy also covers the legal expenses
you might incur to defend this claim. This is a mandatory insurance
coverage for your vehicle

Additional coverages
1.Personal accident cover:

69

The motor insurance provides compulsory personal accident cover of Rs.

1 lakh for individual owners of the vehicle while driving. This is not
applicable for a Company owned Vehicle.
You can also opt for a personal accident cover for passengers (named or
un-named) up to a maximum Capital Sum Insured of Rs. 2 lacs per
person
Available only if the owner of the vehicle holds a valid driving
license.
2.Additional Legal liabilities:
The following additional legal liabilities may also be opted for at an
additional premium
Paid Driver/conductor/Cleaner employed in operation of vehicle.
Employees traveling in/driving the vehicle other than paid driver.
Non-fare paying passengers

Bonus and Discounts:

70

No Claim Bonus: If you do not make a claim during the policy period, a
No Claim Bonus (NCB) is offered on renewals. This discount can go as
high as 50%. (NCB will only be allowed provided the policy is renewed
within 90 days of the expiry date of the previous policy.)

Transfer of NCB: You can transfer full benefits of No Claim Bonus

when you shift your motor insurance policy to another company.

Voluntary Excess discount: A further discount on the premium is

available if you opt for a Voluntary Excess (available only for Private cars
and Two wheelers) in addition to the Compulsory Excess. (Compulsory
Excess is the amount of loss which the insured has to bear in each and
every claim.).

Automobile Association Membership: You can also avail of additional

discount if you are a member of a recognized Automobile Association in
India (available only for Private cars and Two wheelers).

Anti-theft devices: In case you have installed an ARAI approved anti

theft device in your vehicle, you get a discount of 2.5 % on the OD
Premium to a maximum of Rs. 500 for four-wheelers and Rs 50/- for two
wheelers

CHAPTER NO.8

71

AUTO INSURANCE CLAIM SETTLEMENT

If an accident takes place, you must report to the insurance company and
submit the relevant claim forms. An estimate for repairs /replacements
would also be required to submit.
The documents to be submitted are
- Claims form
-Copy of registration certificate of vehicle and driving license of the
driver
- Original / Copy of the insurance policy
-Copy of the estimated cost of repair given by the garage.
- FIR or a police report if the accident is major, or a criminal offence, or if
it caused third-party damage or resulted in injuries
- Fire brigade report, if the loss is due to a fire.
Post this, typically the Insurance company will assign one of its agents to
inspect the value of damage/replacement and recommend on the claim
request. It is based on this report that the claim will be settled.
After repairs, the bill of the repair and replacements (parts used etc) and
payment receipt from the garage should be submitted to the company to
settle the claim.
The process might vary between companies- the payment could be done
either directly to the work shop in the form of a cheque or the company
may recommend preferred auto shops for repair (in the first place).

72

If a third party is involved in the accident, a FIR must be lodged

immediately and at the same time a report should also be sent to the
insurance company.
If the vehicle has been stolen
- file a police complaint and inform the insurer.
- If you don't get your vehicle within 90 days, obtain a "non-traceable
report' from the police & submit to the insuring company to start the
claiming process.

CHAPTER NO.9
73

SCAMS IN AUTOMOBILE INSURANCE

Insurance fraud occurs when any act committed with the intent to
fraudulently obtain some benefit or advantage to which they are not
otherwise entitled or someone knowingly denies some benefit that is due
and to which someone is entitled.
Insurance fraud has existed ever since the beginning of insurance as a
commercial enterprise. Fraudulent claims account for a significant
portion of all claims received by insurers, and cost billions of dollars
annually. Types of insurance fraud are very diverse, and occur in all areas
of insurance. Insurance crimes also range in severity, from slightly
exaggerating claims to deliberately causing accidents or damage.
Fraudulent activities also affect the lives of innocent people, both directly
through accidental or purposeful injury or damage, and indirectly as these
crimes cause insurance premiums to be higher. Insurance fraud poses a
very significant problem, and governments and other organizations are
making efforts to deter such activities.
The Insurance Research Council estimated that in 1996, 21 to 36 percent
of auto-insurance claims contained elements of suspected fraud. There is
a wide variety of schemes used to defraud automobile insurance
providers. These ploys can differ greatly in complexity and severity.
Richard A. Derrig, vice president of research for the Insurance Fraud
Bureau of Massachusetts, lists several ways that auto-insurance fraud can
occur.

Examples of soft auto-insurance fraud can include filing more than one
claim for a single injury, filing claims for injuries not related to an
automobile accident, misreporting wage losses due to injuries, or
74

reporting higher costs for car repairs than those that were actually paid.
Hard auto-insurance fraud can include activities such as staging
automobile collisions, filing claims when the claimant was not actually
involved in the accident, submitting claims for medical treatments that
were not received, or inventing injuries. Hard fraud can also occur when
claimants falsely report their vehicle as stolen. Soft fraud accounts for the
majority of fraudulent auto-insurance claims.
Another example is that a person may illegally register their car to a
location that would net them cheaper insurance rates than where they
actually live, sometimes called "rate evasion". For example, some drivers
in Brooklyn drive with Pennsylvania license plates because registering
their car in a rural part of Pennsylvania will cost a lot less than registering
it in Brooklyn. Another form of automobile insurance fraud, known as
"fronting," involves registering someone other than the real primary
driver of a car as the primary driver of the car. For example, parents
might list themselves as the primary driver of their children's vehicles to
avoid young driver premiums.
"Crash for cash" scams may involve random unaware strangers, set to
appear as the perpetrators of the orchestrated crashes. Such techniques are
the classic rear-end shunt (the driver in front suddenly slams on the
brakes, eventually with brake lights disabled), the decoy rear-end shunt
(when following one car, another one pulls in front of it, causing it to
brake sharply, then the first car drives off) or the helpful wave shunt (the
driver is waved in to a line of queuing traffic by the scammer who
promptly crashes, then denies waving)
Organized crime rings can also be involved in auto-insurance fraud,
sometimes carrying out schemes that are very complex. An example of

75

one such ploy is given by Ken Dornstein, author of accidentally, on

Purpose: The Making of a Personal Injury Underworld in America. In this
scheme, known as a swoop-and-squat, one or more drivers in swoop
cars force an unsuspecting driver into position behind a squat car. This
squat car, which is usually filled with several passengers, then slows
abruptly, forcing the driver of the chosen car to collide with the squat car.
The passengers in the squat car then file a claim with the other drivers
insurance company. This claim often includes bills for medical treatments
that were not necessary or not received.

An incident that took place on Golden State Freeway June 17, 1992,
brought public attention to the existence of organized crime rings that
stage auto accidents for insurance fraud. These schemes generally consist
of three different levels. At the top, there are the professionals--doctors or
lawyers who diagnose false injuries and/or file fraudulent claims and
these earn the bulk of the profits from the fraud. Next are the "cappers" or
"runners", the middlemen who obtain the cars to crash, farm out the
claims to the professionals at the top, and recruit participants. These
participants at the bottom-rung of the scheme are desperate people (poor
immigrants or others in need of quick cash) who are paid around $1000
USD to place their bodies in the paths of cars and trucks, playing a kind
of Russian roulette with their lives and those of unsuspecting motorists
around them. According to investigators, cappers usually hire within their
own ethnic groups. What makes busting these staged-accident crime rings
difficult is how quickly they move into jurisdictions with lesser
enforcement, after a crackdown in a particular region. As a result, in the
US several levels of police and the insurance industry have cooperated in
forming task forces and sharing databases to track claim histories.
76

In the United Kingdom, there is an increasing incidence of false whiplash

claims to car insurance companies from motorists involved in minor car
accidents (for instance; a shunt). Because the mechanism of injury is not
fully understood, A&E doctors have to rely on a patient's external
symptoms (which are easy to fake). Resultingly, "no win no fee" personal
injury solicitors exploit this "loophole" for easy compensation money
(often a 2500 payout). Ultimately this has resulted in increased motor
insurance premiums, which has had the knock-on effect of pricing
younger drivers off the road.

CHAPTER NO.10
CASE STUDY
77

Consumer Education and Research Society (CERS), Ahmedabad, and Ms

Reshma Trivedi Vs United India Insurance Company
The Consumer Disputes Redressal Forum, Ahmedabad (Rural), has partly
allowed a complaint filed jointly by Consumer Education and Research
Society (CERS), Ahmedabad, and Ms Reshma Trivedi, holding United
India Insurance Company liable for negligence and deficiency in service.
The Forum has ordered the company to pay Reshma Rs 30,000 towards
her mediclaim policy with 9 per cent compound interest from the date of
complaint till realisation and Rs 5,000 towards cost, according to a CERS
release here today.
Reshma had taken a mediclaim policy of United India Insurance
Company on October 27, 2000, and renewed it in 2001 till October 27,
2002. Reshma had undergone a hernia operation for the second time in
May 2002, for which she filed a claim of Rs 27,500 on May 10, 2002.
The company rejected her claim saying that the ailment (hernia) was
present when she had applied for the policy.
The company, after consulting its panel doctor, had reasoned that Reshma
had undergone caesarean and hysterectomy operations, due to which she
suffered from hernia for the first time and subsequently for the second
time too. The hernia, she was operated for, was existing while she took
the mediclaim and she had not specified the information under the preexisting clause. United India Insurance, therefore, took the stand that in
her case hernia was a pre-existing disease and, therefore, the exclusion
clause was applicable.

78

CERS contended that it was the responsibility of the insurance company

to prove that in Reshma case hernia was a pre-existing disease and that
the occurrence of hernia had in no way any relation with her
hysterectomy and caesarean operations.
The Forum partly allowed the complaint and directed United India
Insurance to pay Reshma Rs 30,000 of the mediclaim policy with 9 per
cent compound interest from the date of complaint till realisation. United
India Insurance was also directed to pay Rs 5,000 towards cost to her.

ANNEXURE

79

Automobile Collision
Rental Car Insurance
Car Rental Damage Insurance

CONCLUSION
80

The expansion of the automobile as a mass-produced means of preferred

travel has brought with it the great potential for destruction of lives and
property. In response to this, both the state and federal governments
require mandatory insurance coverage. The insurance industry, which had
already developed according to a system of tort law, has been applied to
automobile insurance laws. And those laws have evolved into an
enormous political and economic hydra that politicians and lawyers
constantly critique and reform. Currently, auto insurance is the only
example of something that Americans are required by law to buy
(assuming they own cars), but it is provided exclusively by private
industry on a for-profit basis.
It is amazing these days how many people still spends so much time
trying to get at best deal on their auto insurance. However, with
automobile insurance comparison and major feature of finding insurance
on the Internet, there is absolutely no reason to make all those dozens of
long frustrating phone calls and more.
Firstly, if it is your first time on the road, you may end up having to spend
a lot more on insurance but this is entirely normal. Premiums go down in
price over time providing you maintain your good driving record
however.
Nonetheless, for young drivers, there are some alternatives available
including insurance package especially tailored to younger people. You
could also be a named driver somebody elses car which will save an
enormous amount of money in most circumstances but you need to make
sure that you do not break any thing in the terms and conditions of the
contract.

81

However, regardless of whether you are an experienced driver or a

completely new driver, you will be able to find the automobile insurance
quotes you need online.
Firstly, the amount of money that you will end up paying on the
premiums not only depends on your age and experience of driving, but it
can also depend on other factors such as your gender and where you
drive. Every state has different rules and they can be some considerable
differences in the premiums you pay, depending just on where you live.
You should be able to save quite a lot of money by getting a cheap car.
The price of the premiums is also directly relevant to the engine power of
your car. If you have a very fast engine your car, you are going to pay
higher premiums regardless of your driving experience although if you
are a younger and less experienced driver, you may find it difficult to get
the car in question insured. If you are thinking about buying a car and you
have not actually got one yet, then you need to take this into account. It is
amazing how many people do still make the mistake of buying a car
having not figured out exactly what it will cost to ensure beforehand. This
can lead to disaster, in a worst case scenario meaning the you went even
be able to get the car insured at all.
By punching in some details in your favorites search engine, you will find
plenty of results for automobile insurance comparison websites. All you
need to do is fill in some forms which should not take more than about 10
or 15 minutes at the very most. This way you will be given all the results
you need so you can better value as the package which ideally suits you.
Nonetheless, though the Internet does make everything quicker in this
respect, it is important not to rush into anything as you could end up
paying more than you expected.

82

WEBLIOGRAPHY
www.google.com
www.scribd.com
www.uiic.co.in
www.tataaiginsurance.in
www.bajajallianze.com
www.newindia.co.in
www.futuregenerali.in

83