The practice of motor insurance is influenced, to a large extent, by the Motor Vehicle Act, 1939. This Act makes provision for various matters relating to the use, maintenance and operation of motor vehicles, registration of motor vehicles, construction equipment and maintenance of motor vehicles, control of traffic, etc. Chapter VII -A and Chapter VIII of the Act provide for insurance of motor vehicles against third party risks.
Another Act which has influenced most is the IRDA Act, 1999. IRDA who is the regulatory body of insurance has made certain changes in the field of Motor Insurance.  The Regulator has withdrawn the Tariff with effect from 1st January, 2007.
However the wordings of ‘Liability Only Policy’ will continue and the rates for ‘Liability Only’ are regulated by the IRDA. With regard to “Own Damage” cover the existing policy wordings are to be continued but insurers are given freedom of pricing and permitted to provide additional covers after obtaining the Regulators clearance to the changes. The erstwhile tariff wordings will remain as standard cover.
The two policy forms i.e. Liability only and Package policy continue to be used. The authority has prescribed proposal forms for third party ‘Liability only Policy for private car, two wheelers and commercial vehicles.
Another significant change taken place in the field of motor insurance is the creation of Motor TP Pool. This TP pool is administered by the GIC and all non-life insurance companies who are transacting the Motor insurance business have to compulsorily join the TP Pool.
This pool is an arrangement to share the Third Party losses of Commercial vehicles (only) in proportion of the Gross premium of the insurers. Insurers have to transfer their entire TP premium of commercial Vehicles to TP Pool. This experiment has not been proved successful and most of the private insurers have sought withdrawal from the pool.
General insurers have introduced new “Add-ons” to their motor policies to provide extra benefits at extra cost. Policy wordings as per the erstwhile tariff are to be continued, however additional covers as add-ons to the main policy are permitted to be devised by the insurers and filed with IRDA before introduction into the market-this is known as the File & Use system.
It is also required for any deviations from the erstwhile tariff rates for the standard products. Based on this leeway to insurers the following extra cover or Add-ons are now being offered by insurers:
- Depreciation reimbursement
- Return to Invoice
- No Claim Bonus protection
- Repair of Glass, rubber, fiber & Plastic parts
- Emergency transport and Hotel expenses
- Loss of personal belongings
- Key Replacement
- Daily allowance
- Engine Protector
- Spot Assistance, etc.
Extracts from “Guide for Motor Insurance (IC-72)” by Dr. Rakesh Agarwal. Copyright of Sashi Publications, kolkata www.sashipublications.com and www.bimabazaar.com
