Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
BACHELOR OF COMMERCE
BANKING & INSURANCE
SEMESTER VI
ACEDEMIC YEAR 2015-16
SUBMITTED
IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS FOR THE AWARD OF DEGREE
OF BACHELOR OF COMMERCE
BANKING & INSURANCE
BY
MR. NEEL JAIN
UNDER THE GUIDANCE OF : MRS. ARMIN SODAWATERWALA
SEAT No.
JAI HIND COLLEGE
A ROAD, CHURCHGATE, MUMBAI 400 020
DECLARATION
I ,MR.NEEL JAIN , student of B. Com. BANKING & INSURANCE
Semester VI (2015-16) hereby declare that I have completed the Project
on A STUDY ON MOTOR INSURANCE.
The information submitted is true & original to the best of my
knowledge.
Signature
MR.NEEL JAIN.
SEAT NO.
Course Cordinator
Principal
Internal Examiner
External Examiner
College Seal
ACKNOWLEDGEMENT
Interdependence
Interdependence is something, which is very essential in todays world
for competition of any task. This is also being completed by the joint
effort of so many people, so I wish to pay my gratitude to all those
people who have directly or indirectly contributed towards the
completion of this project. First of all, I owe my gratitude to all might
GOD and my parents because of whom I am able to complete this
project successfully. I am deeply indebted and grateful to Miss. Savita
(Business Associate) who granted the permission to do this project, this
project has successfully taken place
TABLE OF CONTENTS
SR.NO
TITLE
PAGE
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
CH.2
2.1
2.2
CH.3
3.1
3.2
CHP.4
4.1
4.2
4.3
CH.5
5.1
5.2
5.3
RESEARCH METHODOLOGY
FACTORS CONSIDERING FOR PREMIUM RATING
CURRENT AND ECONOMIC SCENARIO
DATA ANALYSIS
CASE STUDY
AN ARTICLE ON MOTOR INSURANCE
BAJAJ ALLIANZ
FINDINGS, SUGGESTIONS AND CONCLUSIONS.
FINDING OF STUDY
SUGGESTION OF STUDY
CONCLUSION OF STUDY
CH.1
The aim of all insurance is to compensate the owner against loss arising
from a variety of risks, which he anticipates, to his life, property and business.
Insurance is mainly of two types: life insurance and general insurance. General
insurance means Fire, Marine and Miscellaneous insurance which includes
insurance against burglary or theft, fidelity guarantee, insurance for employer's
liability, and insurance of motor vehicles, livestock and crops.
The
Insurance
Act,
1972
and
the
General
Insurance
Business
(Nationalisation) Act, 1972 govern Fire and Marine Insurance, while the Indian
Marine Insurance At, 1963 governs marine insurance in our country. These laws
contain provisions relating to the constitution, management and winding up of
insurance companies and the conduct of insurance business of all types. All
insurance business in India has been nationalised.
A Contract of insurance is a contract by which one party undertakes to make
good the loss of another, in consideration of a sum of money, on the happening of a
specified event, e.g. Fire accident or death. Law recognises insurance as a system
of sharing risk too great to be borne by one individual.
Insurance in its basic form is defined as A contract between two parties
whereby one party called insurer undertakes in exchange for a fixed sum called
premiums, to pay the other party called insured a fixed amount of money on the
happening of a certain event."
In simple terms it is a contract between the person who buys Insurance and
an Insurance company who sold the Policy. By entering into contract the Insurance
company agrees to pay the Policy holder or his family members a predetermined
sum of money in case of any unfortunate event for a predetermined fixed sum
payable which is in normal term called Insurance Premiums.
Insurance is basically a protection against a financial loss which can arise on
the happening of an unexpected event. Insurance companies collect premiums to
provide for this protection. By paying a very small sum of money a person can
safeguard himself and his family financially from an unfortunate event.
For Example, if a person buys a Life Insurance Policy by paying a premium
to the Insurance company , the family members of insured person receive a fixed
compensation in case of any unfortunate event like death.
faced a lot of problems for getting their treatments and damages to their vehicles.
After realizing this the introduction of compulsory third party insurance through
the passing of the Road Traffic Acts 1930 and 1934 was done. Later on these Acts
have been consolidated by the Road Traffic Act 1960.
In 1939, India has also realized the importance of Motor Insurance and
Motor Vehicle Act was passed and came into existence in 1939. Earlier, only few
people knew about motor insurance but later on compulsory third party insurance
was introduce by the Act on 1st July 1946. We in India follow the same practice as
that of U.K. Today we follow a set Tariff provided by Tariff Advisory Committee
where as now in U.K. Tariff business have been withdrawn. As Motor Vehicles Act
laid the provisions in 1939 and it required some amendments that were
implemented by the Motor Vehicles Act 1988 and it became effective from 1 st July
1989 and thats how the insurance concept has come to India.
As you all know in our country crores of vehicles are plying on the road and
lot of accidents occurred daily, and due to these accidents damages to material and
third party occurs. Third party is any person other then the owner. But the question
arises how the loss is to be compensated? After realizing all these problems it was
made mandatory for all the vehicles which are plying on the road to have an
insurance which can provide coverage to general public against the risk of loss or
damage to motor vehicles and with this the motor insurance concept has come into
existence and Act made this insurance compulsory for everyone those who are
driving the vehicle on the road so it become quite popular among people and than
motor insurance policies become available to provide a comprehensive cover and a
third party liability cover.
10
11
1) INDEMNITY :
A contract of insurance contained in a fire, marine, burglary or any other
policy (excepting life assurance and personal accident and sickness insurance) is a
contract of indemnity. This means that the insured, in case of loss against which the
policy has been issued, shall be paid the actual amount of loss not exceeding the
amount of the policy, i.e. he shall be fully indemnified. The object of every
contract of insurance is to place the insured in the same financial position, as
nearly as possible, after the loss, as if he loss had not taken place at all. It would be
against public policy to allow an insured to make a profit out of his loss or damage.
12
position
to
judge
(a)
whether
he
should
3) INSURABLE INTEREST:
A contract of insurance effected without insurable interest is void. It means
that the insured must have an actual pecuniary interest and not a mere anxiety or
sentimental interest in the subject matter of the insurance. The insured must be so
situated with regard to the thing insured that he would have benefit by its existence
and loss from its destruction. The owner of a ship run a risk of losing his ship, the
charterer of the ship runs a risk of losing his freight and the owner of the cargo
incurs the risk of losing his goods and profit. So, all these persons have something
at stake and all of them have insurable interest. It is the existence of insurable
interest in a contract of insurance, which distinguishes it from a mere watering
agreement.
4) CAUSA PROXIMA:
The rule of causa proxima means that the cause of the loss must be
proximate or immediate and not remote. If the proximate cause of the loss is a peril
insured against, the insured can recover. When a loss has been brought about by
two or more causes, the question arises as to which is the causa proxima, although
13
the result could not have happened without the remote cause. But if the loss is
brought about by any cause attributable to the misconduct of the insured, the
insurer is not liable.
5) RISK:
In a contract of insurance the insurer undertakes to protect the insured from a
specified loss and the insurer receive a premium for running the risk of such loss.
Thus, risk must attach to a policy.
6) MITIGATION OF LOSS:
In the event of some mishap to the insured property, the insured must take all
necessary steps to mitigate or minimize the loss, just as any prudent person would
do in those circumstances. If he does not do so, the insurer can avoid the payment
of loss attributable to his negligence. But it must be remembered that though the
insured is bound to do his best for his insurer, he is, not bound to do so at the risk
of his life.
7) SUBROGATION:
The doctrine of subrogation is a corollary to the principle of indemnity and
applies only to fire and marine insurance. According to it, when an insured has
received full indemnity in respect of his loss, all rights and remedies which he has
against third person will pass on to the insurer and will be exercised for his benefit
until he (the insurer) recoups the amount he has paid under the policy. It must be
14
clarified here that the insurer's right of subrogation arises only when he has paid
for the loss for which he is liable under the policy and this right extend only to the
rights and remedies available to the insured in respect of the thing to which the
contract of insurance relates.
8) CONTRIBUTION:
Where there are two or more insurance on one risk, the principle of
contribution comes into play. The aim of contribution is to distribute the actual
amount of loss among the different insurers who are liable for the same risk under
different policies in respect of the same subject matter. Any one insurer may pay to
the insured the full amount of the loss covered by the policy and then become
entitled to contribution from his co-insurers in proportion to the amount which
each has undertaken to pay in case of loss of the same subject-matter.
15
The All India Motor Tariff governs motor insurance business in India.
According to the Tariff, all classes of vehicles use two types of policy Forms. They
are Form A and Form B. Form A, or what is commonly known as Act Policy,
covers Act Liability, which is a compulsory requirement of the Motor Vehicles Act.
No vehicle can be used without this minimum insurance cover. Use without such
insurance is a penal offence. The following liabilities can be covered in this policy:
Unlimited Liability towards Third Party bodily injury;
Liability towards Third Party Property Damage to the extent of Rs. 6000/- only;
Unlimited liability towards bodily injury of passengers of the vehicle;
Liability towards employees of the owner of the vehicle while traveling in or
using it, against bodily injury, to the extent required under the Workmens
Compensation Act.
Form B, or what is commonly known as Comprehensive Policy, is an optional
cover, which takes care of the following additional losses and liabilities:
Loss or damages to the vehicle and its accessories and extra fittings protection
and removal costs, and towing disabled vehicles (only for commercial
vehicles).
Liability towards Third Party Property Damage, in excess of Rs.6000/-.
Liability towards employees under Common Law and Fatal Accidents Act, over
and above the liability under Workmens Compensation Act.
Personal Accident Benefits for the owner, passengers and employees.
16
The above or liabilities can be separately covered in conjunction with the liabilities
covered under the Act Policy, by taking a Comprehensive Policy paying an
additional premium.
FORM A POLICY
As per the provisions of Motor Vehicles Act, all the vehicles plying in the
Territorial Limits of India must possess an ACT POLICY at all times. The violation
is punishable with fine etc., as per Motor Vehicles Act (as prevalent at the time of
detection). As described earlier, this policy covers:
1. Third Party Property Damage / Bodily Injury (Fatal or Non-fatal) when Insured
vehicle is used in a public place,
2. Insureds legal liability, as per Motor Vehicle Act, arising out of accident caused
by or arising out of the use of the vehicle anywhere in India, and
3. Such liability as above in respect if injury (fatal or non-fatal) to any third party
and damage to any third parties property.
The owners of the vehicle having insurable interest in it undertake this policy.
The period of the cover is generally a period of 12 months from the date of
inception. However, Short period covers are also available at higher rates. Subject
to limit of liability laid down in the Motor Vehicle Act, the policy pays the
insureds legal liability for death/disability for third party, loss or damage to third
party property. Also, the liability for claimants cost is also met (Maximum Rs.
6000/-) unless additional premium for opting unlimited cover is paid. In addition,
all costs and expenses incurred with insurers written consent are paid.
17
18
When vehicle is used outside the geographical area, when used contrary to
limitation as to use, driven by a person other than the driver as stated in the clauses
mentioned in the policy of insurance.
FORM BPOLICY
Form B is an optional cover, which offers some specific advantages.
Although the Act Policy Form A is identical for different classes of vehicles, the
comprehensive policy cover differs for various classes of vehicles; the
comprehensive policy cover differs for various classes of vehicles. For private cars
and motorcycles, there are two sections in the comprehensive Policy. Additionally,
Section III is provided for commercial vehicles.
I. It concerns loss or damage to the vehicle and covers the risk like:
Fire, Explosion, Self-ignition and Lighting
Burglary, Housebreaking and Theft
Riot, Strike, Malicious and terrorism Damage
Earthquake
Flood, Typhoon, Hurricane, Storm, Tempest, Inundation, Cyclone, Hailstorm
Accidental External Means
Transit by road, rail, inland waterway, lift, elevator or air.
For motorcycles and commercial vehicles, the risk of frost damage is also
covered. From the above coverage, for all classes of vehicles, the risks of riot,
19
strike, malicious and terrorism damage, earthquake and flood and storm; can be
opted out of with a consequent discount in premium. In addition to these, cover is
also available for protection and Removal Costs and authorisation of Repairs.
If a motor vehicle is disabled as a result of loss or damage due to the perils
mentioned above, the insurance company bears the reasonable cost of protection
and removal to the nearest repairer and the cost of redelivery to the owner /insured
subject to a maximum limit, in respect of any one accident. The limit for various
class of vehicle are as follows:
Motor Cycles/ Scooters
Private Car & Taxis
Other Commercial Vehicles
Rs.300
Rs.1500
Rs.2500
The owner / insured is also allowed to authorize repair expenses upto Rs. 500 /- per
accident.
II. It covers the liability towards third parties, i.e., liabilities of bodily injuries
and property damage.
III. It is applicable to commercial vehicles. It covers the vehicle while it is being
used
for the purpose of [Towing Disabled Vehicles. This section covers Third
Party Liabilities that the insured vehicle or the one being towed for reward /
remuneration. Further, the insurance company is also not liable for damages to
the towed vehicle or any property being conveyed thereby.
20
a) PRIVATE CAR
This is used for personal purpose. The premium is computed on the following
basis:
Geographically area of use and cubic capacity
Value of the vehicle.
Accessories are to be specified separately under electrical and non-electrical items.
b) TWO-WHEELER
It is used for personal only. Premium is calculated on cubic capacity and
value of vehicle. Accessories are to be specified. Theft of accessories is not
covered, unless the vehicle is stolen at the same time.
c) COMMERCIAL VEHICLE
21
22
In Indian conditions, the vehicles are subject to many hazards like potholes,
open manholes, puddles, untarred roads, traffic management system, poor
pedestrian management, and absence of footpaths for pedestrians, jaywalkers,
increasing number of accidents etc. which accentuate the need for automobile
insurance. Some of these hazards are discussed below:
i) FOOTPATHS
As footpaths are encroached by hawker, pedestrians have a tough time dodging
vehicles to reach the other end of the road. Large potholes and manholes are a
common sight and during the monsoon the situation can get only worse causing
untold damage to your vehicle.
23
iv) THEFT
Cases of stolen cars are on the rise. Experts in stealing cars are well aware of
the loopholes that can be exploited and accordingly have also been successful I
manipulating with the chasis number of vehicles in order that they are not traced.
v) FIRE
Other than these there is also a danger of fire or theft of vehicle. Therefore,
vehicle insurance under such unsafe conditions is a must not only to cover the
financial liability that may arise from an accident in which the other party is
24
injured. The cost of repairs that you would have to pay to the other party in case of
an accident may be exorbitant. Besides if the accident involves hospitalization too,
the expenses can go through the roof. It would be a great burden if all these costs
are borne by the individual. The insurance company can indemnify against such
losses and the financial liability arising thereof.
If the auto insurance is not made compulsory, there is a strong possibility
that some may not buy these voluntarily. This is because most of them think that
the cost of accidents or losses will fall on others or they underestimate the risk the
loss. Economic arguments for compulsory insurance laws in these people to
consider more of the costs of their actions when deciding whether to drive, what
kind of car to buy, how safely to drive, and so an.
The economic rationale for insurance may be that it affects peoples decision
to drive. Some people are likely to forgive driving if the insurance is made
compulsory insurance is made compulsory since it acts as a financial disincentive.
Another could be that it encourages people to drive safely, which may reduce of
risk. Those who criticize compulsory auto insurance plead that it results in
lowering the disposable income or it results in lowering the disposable income or it
25
26
collides with a truck and the driver dies on the spot. Being an old car, Mr. Tom had
nothing much to lose and that is why he had not taken a Comprehensive Policy.
However, the family of the driver lost their breadwinner.
As an employer, Mr. Tom is liable to compensate for the driver, since he was
driving the vehicle in course of employment. The Motor Vehicles Act, 1988 makes
it compulsory to insure liabilities under Workmens Compensation Act.
According, the legal heir of the deceased driver filed an application to the
labour Commissioner and an Award of Rs. 1, 50,000 was passed against the
employer. Mr. Tom, equipped with an Act Policy, approached the insurance
company, who in turn satisfied the Award. The legal heir of the driver received the
compensation from the labour court soon after and everyone was happy.
The liability for compensation as per the Workmens Compensation Act,
depends on the wages of the employee and his age, and represents mainly the loss
of earnings. However, other losses representing mental pain and agony for the
family, loss of consortium, future expenses on dependents and loss of prospective
earnings are not accommodated in this compensation.
The legal heir of the driver, in the instant case then approached the Motor
Accident Claims Tribunal, demanding a compensation of Rs. 1, 00,000 towards
these losses. The tribunal passed an award of Rs. 50,000, found reasonable as per
provisions of Common Law and Fatal Accidents Act. Mr. Tom had an Act Policy,
which did not cover this liability, and he saddled with the responsibility of
satisfying the court Order. You can imagine the financial burden he had to bear.
27
Had he taken to face this difficulty. The insurance company would have paid this
additional amount of compensation too. It is, therefore, always beneficial and
advisable to take a comprehensive policy covering these liabilities.
EXCLUSIONS
TO
THE
COMPREHENSIVE
COVER
This insurance does not cover loss or damage caused due to:
1. Driver being under intoxication
2. Vehicle being driven by a person not holding an effective,
valid licence. It also does not cover:
3. Damage to tyres (unless the vehicle is also damaged).
4. Wear and tear, mechanical breakdown.
28
INSURANCE
29
4. Load Challan/Trip Sheet: to verify that the load carried was within the
permissible limits and trip sheet giving details of number of passengers carried
in the vehicle.
5. Fitness Certificate: the fitness certificate indicates the roadworthiness of a
commercial vehicle.
6. Report to police: a copy of the FIR and Panchanama is required wherever third
parties are involved in an accident.
7. Survey Report: surveyor ascertains the damage, assess the quantum of payable
claim, verify vehicular documents and confirm that the loss/damage being
claimed for is in conformity with the narration of the accident. Wherever
replacement of p [arts is allowed surveyors with the narration of the accident.
Wherever replacement of parts is allowed surveyors physically verify serial
numbers as appearing on major parts, which carry such numbers.
1.9.2 PROCEDURE:
30
In order to proceed for claim, the insured immediately informs the insurer.
The policy documents are verified to ensure that the policy is force and the loss
is entered in the claims register and the claim form is issue to the insured to be
completed and returned.
The insurer, immediately on receipt of intimation of loss, either in writing or
over telephone, a surveyor is appointed based on the estimate.
In case of major accidents, the insured would be asked to arrange for
photographs of the vehicle at the spot of the accident, showing all the external
damages and the number. Plate of the vehicle. The photo expenses are to be
reimbursed upto Rs. 500. Alternatively, the insured may inform the nearest
office of the insurer to arrange for such photographs.
The survey report is examined and settlement is done based on surveyors
recommendations.
If reinspection after repair is considered necessary it may be conducted by the
same surveyor who has assessed the loss.
Conventionally, the payment is made to the repairer directly.
If for any reason, to be specified, the driving license cannot be produced, the
claim may be considered only on the basis on non-standard basis. However for
settlement of such claims the authority is not endorsed for tourist taxis, since,
different practices prevail in different states, it is on the basis of the practice.
Prevailing in the state where the accident occurs and this will be decided by a
manager and above in the RO.
31
32
33
34
35
4. Policy Copy: Duly certified true copy of the complete policy with the relevant
clauses and endorsements as actually attached with the original issued covering
the vehicle at the material time of accident.
5. Driving license: In case it has been observed that driver was not duly licensed
the necessary information should be given to the advocate. Through under
Section 149(2) of the MV Act, 1988, Insurance Company has no liability if the
driver is not duly license rests on insurance company and this obligation is
required to be discharged fully to the satisfaction of the court.
6. Compliance Policy Conditions: If a breach of a specific condition has been
observed it should be brought to a notice of the Advocate to enable proper
defense if possible.
7. a) Written statement on behalf of the insurance company incorporating all
defenses available as enumerated under Section 149 of MV Act should be
promptly filed.
b) Wherever necessary when there is collusion between the insured and the
claimants or when the insured fails to defend claim, the companys advocate must
be instructed to obtain the MACTs permission under Section 170 of the MV Act
to defend the claim on merits.
8. Payment of No Fault Liability Claims: If Liability under affected policy is
established after taking into consideration the foregoing defenses, company
36
37
38
39
Chapter 2
AUTO POLICY IN UNITED STATES
The Personal Auto Policy, Famous In The U.S. Includes Four Main Types Of
Coverage:
third party liability coverage for liability to third parties harmed by
negligence of an insured person;
first party medical payments coverage for the insured, or in states with nofault or related laws, personal injury protection coverage for the insureds
medical expenses and loss of income;
uninsured and under insured motorists coverage for losses caused to an insured
by drivers without liability insurance and drivers with comparatively low
liability insurance limits; and
Coverage for physical damage to or theft of insured autos.
The auto liability coverage in the personal auto policy provides broad coverage for
liability for bodily injury and property damage to other parties arising out of the
use of an automobile by an insured person. As is customary with the liability
40
insurance, the insurer also agrees to defend the insured and bear the defense costs
and is responsible for negotiating and setting the claims.
Personal auto liability coverage may be sold with a single limit that specifies the
maximum amount that the insurer will pay for all damages from a single accident.
Under the first-party auto medical payments coverage, the auto owner can receive
payment for medical expenses arising out of an accident. Coverage is for the
medical
expenses for the named insured and family members hurt in any auto and other
persons that are hurt while occupying a covered auto. Coverage limits under such
policies are comparatively low.
In U.S.with no-fault or related laws, the personal auto policy includes personal
injury protection coverage for the named insured, family members, and parties hurt
while occupying a covered auto instead of medical payment coverage.
41
Chapter 3
FACTORS CONSIDERED FOR PREMIUM RATING
Automobile insurance pricing has always been a matter of controversies to the
consumers, service providers and the regulators. Auto claims have increased
significantly in India since last 10 years. Auto insurance rates charged to different
customers reflect differences in the discounted expected costs of providing
coverage. In order to classify different persons into homogenous groups with
respect to expected claim costs, insurers generally use rate classification system
that includes:
driver classes that reflect the characteristics of individual insured, and territorial
rating to reflect expected differences in claim costs for people that live in different
geographical areas (holding individual characteristics constant). Of course,
physical damage rates also depend on the type of vehicle, given evidence that
certain vehicles are more likely to be involved in at-fault accidents. The major
factors considered in establishing driver classes and the use of territorial rating
factors are:
42
DRIVER CLASSES
The parameters are Age, Gender, and Martial Status, use of automobile, driving
education and driving record. The insureds in younger age group, the males, the
married ones and new and inexperienced drivers have on average high accidental
claims. The loading on the premium increases by the numbers and amount of
accident claims.
TERRITORIAL RATING
Large cities have higher average claim costs followed by suburban areas, smaller
cities, and small towns or rural areas. In India, the geographical areas have been
classified into Group A and Group B.
Motor/ Automobile Insurance business in India is governed by the All India Motor
Tariff, which lays down the premium rates, terms and conditions. The main factors
taken into consideration for rating in India are vehicle classifications on several
parameters, the geographical area of operations and experiences.
VEHICLE CLASSIFICATION
43
Vehicles are generally classified on the basis of its technical specifications, its
value or use.
44
45
that the insured in this process recovers more amount during the period of
insurance than he was insured for.
However, if the vehicle is totally lost or damaged and cannot be repaired, the
insured would be paid the market value or IEV, whichever is less. It is very
important to select a correct IEV for insurance. There is a tendency of motor
vehicle owners to declare a lower value for insurance to reduce the premium
expenditure. Although, insurance companies
check the IEV for its sufficiency before accepting the insurance, this is not a
correct practice as the insured is exposed to a greater loss in case the vehicle is
totally lost or damaged.
46
accidents. For this purpose, the tariff differentiates two zones in India, i.e. Zone A
and Zone B, for private cars and taxis. Zone A represents the Kolkata region, Delhi
region and Mumbai city. In zone B, the densities of population and road traffic are
more and hence attract a higher premium rate.
Such differential rating does not apply to commercial vehicles such as trucks and
buses, as these vehicles normally travel throughout India for their operation.
However, discounts is allowed on the premium for commercial vehicle used as
contract carriage, school buses, public and private buses for carrying
passengers/workers and operate within a radius of 50 kilometers from the city
limits
Zone A
Andaman
Islands
Arunachal Pradesh
Assam
Bihar
Delhi
Haryana
Himachal Pradesh
(Excluding
City)
Pondicherry
Tamil Nadu
Zone B
&Nicobar Mumbai City
Nagaland
Orissa
Punjab
Rajasthan
Sikkim
Tripura
Uttar Pradesh
West Bengal
47
Chapter 4
48
India is witnessing a boom in car and bike sales and it could not have come at a
better time. The burgeoning middle class and the improvement in roads and
highways have only accentuated the vehicle sales. The spill over effect of this
boom has let the motor insurance portfolio of insurance companies also on the
growth highway
SCENARIO PRE-2001 ERA - DEALER'S AND INSURER'S PERSPECTIVE
In fact, it will be interesting to know what happened prior to 2001 and I would like
to highlight some of the issues prevalent at that time. Let's first look at it from the
dealers' perspective. The concerns were
They used to get commission as little as 5% and that too in non-financed cars.
Only 18% of the car policyholders used to make claims.
There was no system to chase renewals and the only interaction point with the
insurance company was the development officer.
49
In short, insurance was a low priority for the dealer as well as the manufacturer.
On the other hand from the insurer's perspective, motor insurance was a lossmaking portfolio and at best a nuisance. There was no real strategy to control
claims and the poor customer interface was accentuated with excessive dependence
on independent surveyors. There was no data capturing or analysis for customer
segmentation.
50
CURRENT SCENARIO
The scenario is much different today and motor insurance gets its due importance.
Motor insurance today constitutes 60% of the portfolio for most of the general
insurance companies in the world. The trend would be the same in India also. In 5
years, the motor insurance is slated to increase from Rs. 8,000 crores to Rs. 20,000
crores. Currently, it is 41 % of the total general insurance business up from 36%
five years back. The current state of motor insurance as prevailing today can at best
be summarised as below Insurance has become the important driver for dealer profitability and customer
satisfaction;
Motor insurance especially private cars, is an area which all insurers want to
develop;
Continuous increase in cost and charges for labour & parts and higher awards
for third party claims are pushing the claims ratio up.
The next paradigm shift could happen when de-tariffing happens. The fastest
growing regions are Deihi, Andhra Pradesh, Karnataka, Maharashtra and
Gujarat.
51
driven
market.
Country like Italy, which was de-tariffed in mid-nineties provides some good
learning points. The size of the country would be smaller than any of an average
Indian state; however, the country has been divided into 620 geographic risk zones
for insurance rating purpose and insurance companies use up to 76 variables for
rating. In contrast, India has only 2 zones so far.
Further, there are no proper tariffs available.
One thing that is certain among all the uncertainties is that de-tariffing would
change the scenario dramatically and may also impact the biggest profit driver for
the dealer. Some of the changes that I foresee areas below
Premium rates could vary significantly based on make, model & geographic
zones.
52
53
Net profit for repairer: Rs. 2,475/ Net liability on insurer: Rs. 14,850/-
54
Chapter 5
Case study
Claims settlements
INSURANCE
The above two Road projects were covered by BAJAJ ALLIANZ GENERAL
INSURANCE CO. LTD. under two different CAR Policies alongwith ALOP
insurance.
WHAT HAPPENED?
55
the
material
Mixed
Macadam (WMM), Dense Bituminuous (DBM) and SDBC laid on road where
work was in progress along with entire stretch. As a result sections of the road
were severely damaged.
56
Rs. 3 crores was released based on the verbal agreement arrived on 10/03/04 and
without waiting for the final survey report. The balance amount is being paid in the
following week upon submission of the certified bills and survey reports.
LESSONS LEARNT
Be alive to the clients' aspirations and empathize with them. A disaster has
occurred in an area where the clients on-going project was located. Any delay in
remobilizing resources could have led to penalties being levied on the insured for
delay in project completion arising out of their contractual agreements. Immediate
action on our part has ensured that the project gets completed within the time
frame.
57
Chapter 6
AN ARTICLE ON MOTOR INSURANCE
WHY CAR INSURANCE IS A MUST
Kairav Shah in Mumbai
May 07, 2007
58
There are basically two types of motor insurance policies. Type I, which is better
known as Third Party Insurance (Form A), is the one which is compulsory. This
covers the policyholder against damage to a third-party's property or the third
parties themselves.
In simple words, if you were to run into another car and cause damage to that car
and injure the occupant(s) of that car, a third party only policy will pay for the
repair of the other vehicle, and will pay for any medical claims or injuries suffered
by the occupant(s) of the other car and any passengers in your car other than you.
But this policy does not cover the costs of repairing your own vehicle. However,
you could add some riders to this policy that would cover for your legal liability to
pay compensation for:
59
In addition to the coverage under liability only, this policy covers loss or damage to
the insured vehicle and its accessories due to fire, explosion, self-ignition or
lightning, burglary, riot and strike, malicious act, terrorist act, earthquake, (fire and
shock) damage, flood, typhoon, hurricane, storm, tempest, inundation, cyclone and
hailstorm, transit by road, inland waterway, lift, elevator or air. So, this brings us to
what type of car insurance cover is best for you? As a general rule of thumb, the
following points are worth noting:
If you are young and driving an inexpensive first car then you will probably find
the cost of comprehensive motor insurance very high. For instance, a 20 year-old
buys a second-hand car for Rs 1.5 lakhs. In this case, the cost of a comprehensive
policy would be higher as compared to the cost for a third-party fire and theft
policy.
Of course, if there is an accident and you are at fault and your car is badly
damaged, then it you will have to pay for the repair or replacement of the car. But
if you are young and driving a more expensive car, then it will make sense for you
to have comprehensive insurance.
Remember that the no-claim bonus follows the individual and not the vehicle. So
you will be able to garner good discounts on renewal of the policy. The bonus
ranges from 20 per cent to 50 per cent, depending on the number of years for
which no claim has been made. Some important exclusions under this policy
include wear and tear, breakdowns, consequential loss, loss when driving with
invalid driving licence or under the influence of alcohol, use of vehicle otherwise
than in accordance with limitations as to use, etc.
Now, you can do online processing of claims and premium payments. This implies
that life is going to become much easier for the end user.
60
Chapter 7
BAJAJ ALLIANZ'S MOTOR INSURANCE
Bajaj Allianz is a joint venture between Allianz AG one of the world's largest
insurance companies, and Bajaj Auto, one of the biggest 2 and 3 wheeler
manufacturers in the world. Bajaj Allianz is into both life insurance and general
insurance.
Allianz Group is one of the world's leading insurers and financial services
providers. Founded in 1890 in Berlin, Allianz is now present in over 70 countries
with almost 174,000 employees. Bajaj group is the largest manufacturer of twowheelers and three-wheelers in India and one of the largest in the world.
Today, Bajaj Allianz is one of India's leading and fastest growing insurance
companies. Currently, it has presence in more than 550 locations with over 60,000
Insurance Consultants.
61
UNIQUE FEATURE
For claim free experience, discount available on subsequent renewal.
Discount available if voluntary excess opted for
Discount available for membership with approved automobile association
Discount available for installing approved anti-theft device
Depreciation, for the parts needing replacement in the accident is defined
ADVANTAGES
Standardized labour costs
Highest standards of service
Hassle-free inspection procedures
BENEFITS
Cashless settlement of repair claims at preferred garages.
Immediate receipt of policies
Speedy claim settlement
Highest standard of services at the preferred garages
Hassle-free documentation and inspection procedures
Quick settlement of major losses such as theft/total loss
62
Bajaj Allianz is now offering a set of new benefits to both its existing and potential
motor insurance customers. Hungary's market-leading insurance company has a 50
percent share of motor third party liability policies, according to the most recent
half-year
figures.
Bajaj Allianz offers eight new different partner benefits, plus premium discounts
connected to the method and frequency of payment. Loyalty and other benefits
make the new services even more attractive to every customer. Through the
benefits, it is possible to get a premium discount of up to 33 percent.
EASY ACCESS
The company's national network makes personal contact easy through more than
100 company-owned service units and over 900 contracted body repair shops. The
company's call center and Internet customer care facility offer a wide range of
services: giving information, concluding transactions, starting claims settlement or
registering data changes.
Since Bajaj Allianz introduced its new premium system on October 30, most
telephone calls and clicks have been about premium calculations for third party
insurance. Within the first three days, 130,000 customers received their individual
quotes.
63
64
CONCLUSION
India is witnessing a boom in car and bike sales and it could not have come
at a better time. The burgeoning middle class and the improvement in roads and
highways have only accentuated the vehicle sales. The spill over effect of this
boom has let the motor insurance portfolio of insurance companies also on the
growth highway.
Todays consumer has became more conscious about his health and wealth
also they are becoming more demanding due to awareness of insurance therefore,
Motor insurance companies are facing challenges of Best service level at the
lowest price. This creates competitions between insurance companies. However,
Insurance Companies are trying to overcome the challenges by providing 24/7
assistance to customers for all product queries and claims information.
As compared to Insurance abroad, motor insurance companies in India still
have a long way to go. Since, India is booming in car and bike sales and even with
the awareness of motor insurance in people motor insurance company is going to
have a better time in future.
65
RESEARCH DESIGN
DATA COLLECTION
PRIMARY DATA COLLECTION :In this chapter the focus will now shift to the choices of researchers for
collecting primary data. The researcher will opt for either quantitative research
methods or qualitative research methods or a combination of the two. For all
practical purposes, usually not much about a marketing problem is known to the
researcher, so they will start with the survey method of data collection.
This chapter will involve discussions on sampling as the basis of survey,
questionnaire and interview methods of data collection.
SURVEYS:One of the most preferred methods for collecting primary data is the
survey method. The biggest advantage of the survey method is that at a time a lot
of information (or data) about a single respondent can be obtained. And secondly
the versatility of this method enables the researcher to mould the survey method to
the research objectives, in any setting - be it the bubbling youngsters, growing
teenagers, mobile youth or aging executives.
66
A.
Telephone interviews
PERSONAL INTERVIEWS:
Generally personal interviews are classified based on the respondents to
67
requirement.
Conducive, familiar and comfortable environment for the interviewee
TELEPHONE INTERVIEW:
A large class of consumer behavior problem can be attempted to be solved by
adopting the telephone interview method of collecting information . This is also
being accepted as a popular as a popular method especially with the cost and nonresponse problem of personal interview becoming more acute .
The telephone interviewing process though quite similar to personal interview
involves certain steps in the form of :
a.
b.
c.
d.
Work out and clarify the convenient time of the respondent for interview .
e.
68
69
70