Liability Insurance

Liability insurance

Liability Insurance

• Product Liability• Professional Liability• Arises if there is a violation of a person’s legal

rights or a failure to perform legal duty owed to certain person or to society as a whole.

• Classes of legal wrong– Crime– Breach of contract– Tort

Categories of torts• Intentional torts: assault, battery, trespass, false imprisonment,

fraud, libel, slander and patent and copyright infringement.• Strict Liability: Rylands vs.Fletcher If a person brings on his land

anything which is likely to do mischief if it escapes, he will be prima facie answerable for the damage caused by its escape though he had not been negligent.

• Absolute liability: liability is imposed even without negligence or fault. Examples– Occupational injury and disease– Blasting operations– Manufacturing of explosives, medicines, food products eg. M C Mehta

vs. Union Of India – Owning wild or dangerous animals– Crop spraying by airplanes

• Negligence: failure to exercise standard of care required by law to protect others from an unreasonable risk of harm.

Defences against negligence

• Contributory negligence

• Comparative negligence– Pure rule– 49 percent rule– 50 percent rule

• Last clear chance rule

• Assumption of risk

Imputed negligence

• Employee employer relationship Vicarious liability

• Family purpose doctrine

• Joint business venture

Res ipsa loquitur

• Meaning the thing speaks for itself. Injury or damage establishes a presumption of negligence on behalf of the defendant.

• Requirements– The event doesnot happen except in case of

negligence.– The defendant has exclusive control over the

instrumentality causing the accident.– The injured has not contributed to the negligence in

any way.

• Muncipal Corporation of Delhi v. Subhagwati

Specific applications of the law of negligence

• Property owners– Liability in case of trespasser– Liability in case of licensee– Liability in case of invitee.

• Attractive nuisance doctrine : a condition that can attract and injure children.

• Owners and operators of automobiles• Governmental liability• Charitable institutions• Employee employer• Parents and children• Animal owners

Special Tort Liability Problems

• Products Liability: liability of retailer or manufacturer (privity of contract doctrine)

• Solutions:– State of the art defense– Alteration of the product defense

• Professional liability: A genuine error of judgement by doctors, lawyers, accountants, architects, insurance brokers, actuaries etc. Spring meadows hospital v. Harjot Ahluwalia

• Employer’s liability/ workmen’s compensation insurance: insurance compulsory, ESI Act

• Directors and Officers Liability:

Public Liability Insurance

• For individuals

• Third party insurance

• Business risks

• The public Liability Insurance Act,1991: mandatory for installations handling hazardous substances.

Characteristics of liability insurance

• Liability may be by litigation, arbitration or agreement.• Loss is the sum finally determined by law. Law means both statutory as

well as common law.• Potential liability is open-ended.• Claimant is not the insured but a third party.• Two stages of claims processing.

– Whether the policy covers the claim or not;– Whether the insured is legally liable to pay or not. If yes, how the amount is to be

determined.

Origin and development of liability insurance in India

• Enactment of Workmen’s Compensation Act,1923, Motor Vehicles Act,1939 and compulsory third party insurance.

• Bhopal Gas Tragedy in 1984.• Environment Protection Act,1986, Public Liability

Insurance Act,1991.• Consumer Protection Act,1986• Employees State Insurance Act,1948• Supreme Court decision in the case of Shriram Food &

Fertilizer Industries (vide M.C Mehta vs, Union of India) ruled that civil liability of corporation for torts also attached to directors and other officers.

PUBLIC LIABILITY INSURANCE

• Coverage :– Liability to a person and his dependants for death or injury,– Liability for damage to property,– Liability for legal costs involved in defending the case irrespective of

whether the case gets decided for or against the insured.• Add on benefits by paying additional premium

– Liability due to Pollution– Liability during transportation of material including hazardous ones

outside factory premises– Liability because of effluents discharge through pipelines– Earthquake risk– Technical collaborators liability.

• Target Group: A whole range of industries starting from a humble bakery or a beedi rolling unit to hi-tech aircraft hangers, chemical manufacturing plants, hydroelectric power stations and ship building units.

What is the Amount of Cover Available?

• AOA (any one accident) limit and AOY (any one year)/AOP (any one period) limits.

• But there is a restriction that only four ratios are permitted for AOA to AOY, i.e., 1:1, 1:2, 1:3 and 1:4.

• So, if an AOA limit of Rs. 50 Lacs is selected, the AOY limits can either be Rs. 50, 100, 150 or 200 Lacs.

• It is also important to remember that these limits are inclusive of all legal costs likely to be incurred.

• Factors to be considered for deciding the premium:– Risk group of the industry– Limit of AOA– Ratio of AOA to AOY– If more than one unit is to be covered in the policy, number of units– Turnover of the business– Additional covers opted for

What Risks are not Covered in the Policy?

• Excess: The first 0.5% of the AOA limit (subject to a maximum of Rs. 2 lacs) for each claim is deducted from the claim

• Liability assumed by any specific contract• Loss of goodwill, market, etc.• Punitive or exemplary damages • Specific liabilities covered elsewhere such as liability due

to the use of a motor vehicle, aircraft, watercraft, hovercraft, etc.

• Liability covered under Public Liability Act of 1991• Liability arising due to war, civil war, etc.• Liability due to radiation or contamination from

radioactivity.

What is the Claims procedure?

• Liability claims are said to have a “long tail”, i.e., an incident occurring at one point of time can produce an effect much later. Claims made vs. occurrence coverage.

• So, the policy provides for special relaxations to the insured to register and get claims from an Insurance company much after the first incident has occurred provided the policy has been kept in force and all premiums paid on time.

• Normal steps for making a claim are as follows:– Inform Insurers as soon as possible of any incident, which may produce

a liability claim at a future date.– The rule is to settle claims through the legal channel only. However, if

the liability is clear, the insurer may prefer to compromise the claim out of court.

– The basic assessment is of actual monetary loss suffered due to the incident. Some component of pain and suffering as well as loss of future earnings also are considered.

– The peculiarity of a liability claim is that the insured does not have to do very much except providing the Insurer the information asked for. Insurer does the final settlement with the affected party.

Directors’ and officers’ Liability Policy

• Coverage: ‘Loss’ shall mean legal liability of the directors or officers to pay damages or costs awarded against them and costs and expenses incurred by the directors or Officers with the written consent of underwriters in respect of investigation, defense or settlement of any claim.

• A wrongful Act shall mean actual or alleged breach of duty, breach of trust, neglect, misstatement, misleading statement, omission, and breach of warranty of authority or other act done or wrongly attempted by any Director or Officers.

• Claims : Any writ or summons issued against or served upon any directors or officers for any Wrongful Act, or,

• Any written communication alleging a wrongful Act communicated to any Director or Officer.

• Loss arising from claim first made against the Directors or Officers where company is required or permitted to indemnify the Directors or Officers pursuant to the law, common or statutory, or the Memorandum and Articles of Association

• Company reimbursement provision shall be applicable if such an obligation is expressly mentioned in the Company’s Articles of Association or in an agreement between the company and the concerned director or officers.

Exclusions• Legal action or litigation brought in a court of law within the Excluded

Territories • Indemnity or payment is available from any source, other than the policy.• Any actual or alleged bodily injury, sickness, disease or death of any person

or any tangible property, including loss of use thereof arising out of, any actual or alleged seepage, pollution or contamination of any kind . (This is a subject matter of public liability policy)

• Made by any third party based upon breach of any professional duty owed to such third party. (This is a subject matter of a professional indemnity policy).

• Brought about by any circumstances existing prior to or at the inception date of the policy and which the directors or officers or the company knew or ought reasonably to have known could give rise to a claim.

• For tax or fines or penalties or punitive or exemplary or multiple damages or any claim deemed uninsurable under law.

• Based upon, actual or alleged libel, slander, infringement of copyright, infringement of patent (separate policies can be availed of)

• Directly, resulting from goods or products manufactured or sold or supplied by the company (this is a subject-matter of products liability policy).

Professional Liability Insurance

• Also referred as Malpractice policies or errors-and-omissions policies.

• Professional vs. other liability contracts• Insurer needs consent of insured to settle claims out of

court as it may damage the reputation of the professional.

• Limit of liability not by per accident but in terms of per claim.

• The act that gives rise to the claim is not accidental but deliberate.

• The policy responds to suits based on professional’s error, mistake or malpractice but not to warranty successful results.

Commercial General Liability and Commercial Umbrella Policy

• Under CGL one can insure general products and completed operations liability; personal injury; advertising liability; medical payments; and liability for damage to premises rented to the insured. Two options for events that trigger coverage: claims made and occurrence.

• Commercial umbrella policy is purchased to pay for catastrophic losses. In this case the insurer will require primary insurance in form of CGL, a business auto policy, workers compensation policy etc.

• Coverage under the umbrella includes property in the insured’s care, custody and control, worldwide products coverage.

• Umbrellas are written with few exclusions, and endorsements are used to limit coverage. However, in primary policies, endorsements are used to broaden the coverage.

• For higher liability coverage, excess umbrella policies may be purchased.

Property Insurance- Non Life Insurance

• Marine Insurance

• Motor Insurance

• Fire Insurance

• Health Insurance

• Project and Engineering Insurance

Marine Insurance

• Ocean marine insurance– Hull insurance– Cargo insurance– Protection and indemnity insurance– Freight insurance

• Inland marine insurance• Hull Insurance deals the Loss associated with

floating crafts, Cargo insurance provides cover in respect of loss or damage to goods during transit by rail, road, sea or air.

TYPES OF MARINE INSURANCE POLICIES

• Voyage Policy

• Annual policy

• Open cover

• Duty policy

• Marine Cum Erection Policy

TYPE OF CONTRACT RESPONSIBILITY

FREE ON BOARD SELLER IS RESPONSIBLE TILL THE(F.O.B) GOODS ARE PLACED ONBOARD.

COST & FREIGHT THE BUYERS RESPONSIBILITY STARTS(C & F) FROM THE TIME THE GOODS ARE

PLACED ONBOARD

COST INSURANCE THE SELLER IS RESPONSIBLE FOR & FREIGHT (C.I.F) ARRANGING INSURANCE WHICH IS

INCLUDED IN THE COST OF THE GOODS.

MARINE CARGO SALE CONTRACTS - TYPES

MARINE CARGO SALE CONTRACTS - TYPES

• The type of sale Contract determines the person responsible for insurance

• This information is essential for considering proposal for cargo insurance

• For Normal sales within the country, risk in the goods moves from seller to buyer at the same time the property is transferred

• It means that seller is responsible for any loss or damage to goods until ownership passes to buyer.

MARINE CARGO SALE CONTRACTS - TYPES

• In normal transactions the buyer is responsible after the transfer is complete

• This does not apply to Export sales.In international trade, Transfer of Risk & Transfer of property (ownership) are separated.

• In FOB, C&F,CIF , the risk in the goods passes to buyer once the goods are put on ship.

• However the ownership passes to buyer only when he accepts the goods /documents in the destination country.

A further security in the form of insurance policy is also required by the bank to protect its interest in case of goods suffering loss or damage while in transit, in which case the importer may not make the payment.

The terms and conditions of the insurance are specified in the letter of CREDIT.

The RISKS covered in a marine policy falls under three categories •MARINE PERILS

•EXTRANEOUS PERILS

•WAR & STIRKES, RIOTS & CIVIL COMMOTION RISKS (S.R.C.C)

MARINE PERILS : are the perils associated with rivers, seas.

EXTRANEOUS PERILS: Ex: theft, pilferage non delivery are some of the extraneous perils.

Loss due to WAR, STRIKES and CIVIL COMMOTIONS (SRCC) can also be covered under a Marine policy.

The consequences of these perils may result in total loss.

CARGO CLAIMS

• Types of Marine cargo Losses are:- Total Loss - Actual or Constructive Partial Loss – Particular Average, General Average Expenses - Sue & Labour charges

Particular Charges Salvage charges

Extra charges- Survey Fees Sale charges etc.

TOTAL LOSS

• Two Types Actual Loss and Constructive loss

• Actual Total loss : • Goods completely lost / destroyed due to

Marine peril • Measure of Compensation(Indemnity) is Full

Insured Value. • Damaged to such extent that it is no longer a

thing of the kind insured (Fruits damaged) • Insurers can take over the salvage

TOTAL LOSS

• Constructive total loss• It is a commercial loss only • Occurs in following situations:- • When subject matter Insured is

abandoned since Actual Total loss is unavoidable

• When expenditure for Repairs or Recovery exceeds value of subject matter after Repair / Recovery

PARTICULAR AVERAGE

A particular average loss is a partial loss of subject matter insured. Deductions are as per excess and franchise clauses.

Example: If fire is discovered onboard a laden vessel, the following items make up the general average loss:

1. Cost of damage caused by water or any other methods used to extinguish the fire

2. Cost of repair if the ships structure has to be altered to gain access to fire.

3. Value of any cargo damaged or jettisoned during efforts to control fire

4. Cost of using the ships equipment and the wages of the crew during the general average incident.

GENERAL AVERAGE

• GA Losses – Shared proportionately by all the interested persons w.r.t. risks In case of GA Act, Ship owner has lien on goods (security) for GA contribution from consignee of goods

• Usually consignee executes a Bond for this contribution.

• Bank guarantee/Deposit are also given

Example: A vessel runs aground in a dangerous position

1. Cost of tugs to refloat the vessel including salvage award

2. Cost of running ships equipment while refloating

3. Cost of discharging cargo into lighters and reloading into vessel.

4. cost of pollution removal if the cargo is jettisoned and the value of the cargo lost.

5. stores consumed and wages paid to crew during the general average incident.

SALVAGE LOSS:

With Marine cargo policies, the term is often referred to as salvage loss. Ex. Say goods insured are damaged enroute, and the goods are such that they deteriorate incase of prolonged storage or by they time they reach their destination. It is then prudent and sensible to dispose of the same at an early date for the best price obtainable. The difference between the insured value and the net proceeds of the sale becomes the salvage loss.

SUE & LABOUR CHARGES:

These are expenses incurred by the insured or his agents in order to avert minimize a loss covered by the policy. Example of such charges are the landing cost at intermediate ports , ware housing , reconditioning and re forwarding. It should be noted that the insured should always THINK AND ACT in such manner as a UNINSURED would act.

Fundamental concepts of ocean marine insurance

• Covered Perils: Types of covers – Institute Cargo Clause (C) : Named Peril basis– Institute Cargo Clause (B) : Named Peril basis – Institute Cargo Clause (A) offers the widest form of cover under Marine Cargo Insurance in

so far as it relates to the perils covered. ICC (A) is an unnamed perils clause. • Particular Average : partial loss of or damage to the subject matter of insurance.• General Average: when a sacrifice is made or an expense voluntarily incurred to

preserve the rest of a venture, the loss or expense should be shared among all the interests involved in proportion to their value.

• General average is a voluntary and deliberate loss whereas particular average is fortuitous or accidental.

• General average losses are borne rateably by all the interests, which benefit, but particular average rests where it falls, and is recoverable from the insurer of the particular subject matter lost or damaged.

• A general average loss may include expenditure, but particular average can only be loss or damage of the subject matter insured caused by an insured peril and would not embrace any expenses.

• Abandonment: The cession by the insured to the insurer of the remains of his property, and rights relating to it, when a constructive total loss is claimed.

Common clauses attached to an Inland policy

• Warehouse to warehouse clause• The Insurable Interest• The Agreed Value: Normally insurance is taken for Invoice cost plus

Insurance charges plus 10% loading on the total figure.• Factors determining premium:

– Commodity being transported; – Types of packing;– Mode of transport;– Details of the Vessel used for the shipment;– Length/duration of journey;– Season in which the journey is to be undertaken;– Volume of business;– Claims experience of the Client and /or the commodity; and– Voluntary excess (The minimum amount which an Insured agrees to

bear out of every claim, normally in consideration of a reduction in premium rates)

The exclusions

• Exclusions vary according to the type of cover opted. However general exclusions are:– Loss due to wilful misconduct of the insured.– Ordinary leakage, ordinary losses in weight or volume or

ordinary wear & tear.– Loss caused by insufficiency or unsuitability of packing.– Loss proximately caused by delay, even though delay be caused

by a risk insured against.– Loss caused by inherent nature of the subject matter insured– Strikes, Riots and Civil Commotion Clause. These risks are

normally excluded but can be covered by payment of additional premium

INSTITUTE CARGO CLAUSES (A), (B) & (C)

Risks/Contingencies Covered by ICC(A):

a)All risks of loss or damage to the subject matter insured except those specifically excluded. The term “all risks” is not to be construed as embracing loss or damage, which is inevitable. The loss or damage, in order to be recoverable, must have occurred fortuitously.

b)General average and salvage charges incurred to avoid loss from any cause or causes except those excluded.

c)Liability under “Both to Blame Collision” clause of the bill of lading.

d) Charges reasonably and properly incurred to avert or minimize an insured loss and to preserve and pursue recovery rights are also covered (as per Duty of Assured Clause).

e) In the event of termination of the transit resulting from a risk covered. EXTRA CHARGES incurred in unloading, storing and forwarding the insured cargo to destination (as per the Forwarding Charges Clause).

Comparison between the institute cargo clauses (A), (B) & (C)A comparative analysis of the institute Cargo Clauses (A), (B) & (C)

Type of risksCovered () not covered () A B C

Loss / damage reasonably attributable to: 1. Fire or explosion 2. Vessel/Craft being stranded, grounded, sunk or capsized. 3. Overturning/derailment of land conveyance.

4. Collision or contact of vessel, craft or conveyance With any external object other then water. 5.   Discharge of cargo at a port of distress 6. Earthquake, volcanic eruption, lightning 7. General average and salvage charges incurred to avoid loss from any cause except those excluded 8. General average sacrifice

A B C 9. Jettison 10. Washing overboard 11. Entry of sea, lake or river water into the vessel,

craft, hold, conveyance, container, lift van or place of storage. 12. Rainwater damage 13. Total loss of any package lost overboard or dropped whilst loading or unloading from vessel or craft. 14. Piracy. 15. Deliberate damage or destruction by wrongful act

of any person or persons, (i.e. by malicious acts) (Can be covered by malicious Damage Clause for I.C.C (B) and (C) upon payment or extra premium)

16. In the event of frustration of the voyage resultingfrom a risk covered, extra charges incurred inunloading, storing and forwarding to destination

A B C

17. Reasonable charges for averting or minimizing loss recoverable under this insurance and also those incurred, to pursue recovery rights against carriers, bailees or third parties. 18. Other or extraneous perils all involving a fourtuity and from external causes(s), for example: Damage as a result of shifting in heavy weather

Improper stowage Rough handling Breakage, leakage, denting, scratching, crushing, crumpling, chipping, chafage Heating sweating Infestation, mould, mildew, rust, county damage Hook and sling damage Contact with mud, oils and acids, damage by other cargo Shortage, theft, pilferage, non-delivery Other loss/damage caused fortuitously and from external cause or causes

A B C 19. liability under “Both to blame collision” Clause of Bill of Lading.

COMMON EXCLUSIONS • Loss, damage or expenses attributable to willful misconduct of

the assured• Ordinary or inevitable losses• Loss, damage or expense caused by inherent vice or nature of

the subject matter insured• Loss/damage due to insufficient, unsuitable or defective packing

(including stowage)• Loss/damage or expenses proximately caused by delay even if

the delay is caused by a peril insured against• Loss damage or expenses arising from insolvency of the

owners, managers, charterers or operators of the vessel.• Loss damage due to un seaworthiness of the vessel or craft,

container, lift van employed for carrying the insured matter.• Wars, strikes and civil commotions unless covered under

separate endorsements.

Carriage of goods by Rail• Effective from 1st July, 1990 the new Indian Railways Act, 1989

came into force, replacing the earlier Act of 1890. • The liability of the railways is of a common carrier so long as the

goods are in transit and that of a bailee (under Sections 151, 152 and 161 of the Indian Contract Act, 1872) for a period of 7 days thereafter. The liability of the railways ceases on expiry of 7 days after termination of the transit.

• The liability of a common carrier is absolute as that of an insurer of goods for any loss, damage, destruction, deterioration, short or non-delivery, save and except where such loss, damage, etc. is caused on account of act of God, enemies of state, inherent vice or fault of the consignee himself.

• Liability of a bailee,on the other hand, is only for failure to take reasonable care, that is for negligence and misconduct on his part or on the part of his servants.

• Goods carried at owner’s risk rate

Other Modes of Transport• Carriage of goods by Road: The Carriers Act 1865

governs liability of road transporters, according to which anyone who carries goods not belonging to him for hire or reward is a common carrier. The common carrier may limit his liability by a special contract, if he chooses to do so. Otherwise his liability is absolute ‘’as of an insurer” of the goods.

• Multimodal Transportation Of Goods Act, 1993 • The MTO remains responsible for the goods throughout

the period from the time he takes them in his charge until the time of their delivery. The MTO shall be liable for loss resulting from: – Any loss of or damage to the consignment; – Delay in delivery of the consignment and any

consequential’ loss/damage arising from such delay,

Cargo claims procedure summary

• You should inspect cargo on arrival; • You must hold the transport operators liable for any loss or damage; • You should contact the nearest claims settling agent; • A surveyor may be required to determine the nature, cause and extent of

loss/damage; and• Act swiftly - the cargo remains your property. • Documentation that is usually required when presenting a claim includes:

– Bill of Lading/Air Waybill– Commercial Invoice– Insurance Certificate– Copy of notice of claim reported against carrier– Documentation relating to out-turn/receipt of goods– Local Carriers Waybill, where applicable– Copy of temperature records, where available– Invoices to confirm salvage/sale price, where applicable– Copy of instructions to carrier regarding carriage temperature, where applicable – Note: For a marine insurance claim to be paid, insurers require: – evidence of physical damage to cargo; and – complete documentation.

Motor Insurance

Divided into Three Broad categories of vehicles for the purpose of Insurance

Private Cars Motor Cycles/Scooters Commercial Vehicles

• MV Act originally passed in 1939

• Far reaching wide amendments made- 1988MV Act provides for compulsory Insurance against third party Loss/Damage

• Compulsory Insurance applies only when the vehicle is used in a public place (Public Roads)

• Compulsory insurance is reqd for follg:- • Compensation for • * Death, Injury to third parties, • * Property Damage • Third persons/parties include: • Owner of goods / Authorised

representative carried in the vehicle • Passenger of Public service vehicle

• Maxm. Limit of compensation / liability covered by a compulsory Ins. Policy for any one accident is:-

• Death/Injury to any person –Unlimited

• Property Damage to III party- Rs.6000/-

• Sec 140 of Motor Vehicle Act 1988• Owner of vehicle to pay compensation for Damage /

Injury from an accident• Claimant need not prove negligence of the Motorist• Liability is automatic• Amt. of compensation is:-• For Death…… ……………Rs.50000/-• For permanent Disablement Rs.25000/-• After receiving the above amount ,the claimant can also

proceed for compensation under other provisions of the Act(Fault & Negligence)

ACCIDENT AND MOTOR INSURANCE

• Material Information in Motor Insurance – cubic capacity of engine; – the year of manufacture; – carrying capacity of the vehicle; – the purpose for which the vehicle is used; – the geographical area in which it is used; and– the owner’s or driver’s convictions for traffic

offences etc.

• Two types of policies –Liability only• Package• LIABILITY ONLY POLICY• covers only third party damages • Extent of cover as stipulated under MV

Act• PACKAGE POLICY • Known as “Comprehensive policy” • Covers both Third party & Vehicle Damage Can

be extended to cover additional liabilities also.

Types of Coverage• Liability policy (informally called third party policy): Third Party Liability for

bodily injury and/ or death and Property Damage and Personal Accident Cover for Owner-Driver.

• Package policy covers loss to insureds' vehicle on account of – Fire, explosion, self ignition or lightning– Burglary housebreaking or theft– Riot and strike, malicious act, and terrorist activity– Earthquake (fire and shock damage)– Flood, typhoon, hurricane, storm, tempest, inundation, cyclone, hailstorm,

and frost. – Accidental external means– Whilst in transit by road, rail, inland-waterway, lift, elevator or air– Landslide and rockslide.

• additional benefits on payment of extra premium include:• Damage to the Electrical / Electronic fittings not part of standard

equipment of the vehicle.• Damage to the CNG/LPG Fuel Kit System • Liability to the paid driver in excess of that is provided by WC Act 1923.• Personal Accident cover for occupants• Legal liability to employees while traveling or driving (not as paid driver)

Personal Accident (PA) Cover

• applicable under both Liability Only and Package policies.

• The owner of insured vehicle holding an ‘effective’ driving license is termed as Owner-Driver

• Cover is provided to the Owner-Driver whilst driving the vehicle including mounting into/ dismounting from or traveling in the insured vehicle as a co–driver.

• PA cover cannot be granted where a vehicle is owned by a company, a partnership firm or a similar body corporate.

• Where the owner-driver owns more than one vehicle, compulsory PA cover can be granted for only one vehicle as opted by him/her.

Personal Accident (PA) Cover

TYPE OF

VEHICLES

CAPITAL SUM INSURED

PREMIUM (Rs.)

COVER

Motorised Two Wheelers

Private Cars

Commerci

al vehicles

Rs.1 lakh

Rs.2 lakh

50/-

100/-

i) 100% of CSI for Death, Loss of Two Limbs or sight of both eyes or one limb and sight of one eye.

ii) 50% of CSI for Loss of one Limb or sight of one eye.iii)100% for Permanent Total Disablement from injuries other than named above.

iii) 100% for Permanent Total Disablement from injuries other than named above.

Optional Personal Accident Cover for persons other than

Owner-Driver• The cover under this section is limited to maximum

Capital Sum Insured (CSI) of Rs. 2 lacs. per person.• Cover is available only in respect of

– Private Cars, three wheelers rated as Private cars and Motorized Two Wheelers (not used for hire or reward) with or without side car

• For insured or any named person other than the paid driver and cleaner.

• For unnamed passengers limited to the registered carrying capacity of the vehicle other than the insured, his paid driver and cleaner.

– In respect of all classes of vehicles: For paid drivers, cleaners and conductors.

Scope of the cover, Capital Sum Insured and the annual premium

payable DESCRIPTION OF BENEFITS

% OF CAPITAL SUM INSURED

PREMIUM FOR EVERY UNIT OF CSI OF Rs.10,000/- OR PART THEREOF (IN Rs)

Pvt.Car Mot.TwoWheeler Com.Veh.

i) Death only 100% 5 7 6

ii) Loss of Two Limbs or sight of two eyes or one limb and sight of one eye

100% 5 7 6

iii) Loss of one Limb or Sight of one eye

50% 5 7 6

iv) Permanent Total Disablement from injuries other than named above

100% 5 7 6

• AS AN ILLUSTRATION • Rates of Premium depend on the following• Private Cars• *Cubic capacity as given by manufacturers

*Insureds’ declared Declared Value • *Zone of operation • *Extent of cover – TP / Own Damage • Buses• *Number of Passengers • *Insured’s Declared Value

EXCLUSIONS

• Consequential loss• Depreciation• Wear & TearMechanical & Electrical Breakdown

/ Failure / Breakage • Damage to Tyres• If the vehicle is also damaged along with Tyres

then only damage to tyres is allowed up to 50% of replacement cost.

• Loss/Damage when vehicle is driven under the influence of Intoxicating Drugs/ Liquor

EXCLUSIONS

• Damage caused by overloading or strain of the vehicle not covered

• Compulsory Excess to be borne by the Insured• Loss of lamps/Tyres, Mudguards, Bonnet side parts,

Bumpers, Paint work not payable• However if there is total loss of vehicle then the above is

covered.• Repairs to be carried out with Insurer’s Authorisation.• Exception is made if the cost of repairs not more than

Rs.500,(Rs.150/- for Motor cycles) &Insurers are furnished with detailed estimate.

Extension of Geographical Area

• The Geographical Area of Motor Policies may be extended by payment of a flat additional premium to include:

• Bangladesh• Bhutan • Nepal • Pakistan • Sri Lanka • Maldives

Vintage Cars & Classic Cars

• Vintage car. :Any car manufactured prior to 31-12-1940 and duly certified by the Vintage and Classic Car Club of India.

• Classic Car : Any car manufactured after 31-12-1940, but before 31-12-1970.

• Valued Policies: Under an Agreed Value Policy a specified sum agreed as the insured value of the vehicle is paid as compensation in case of Total Loss/ Constructive Total Loss of the vehicle without any deduction for depreciation.

• It is not permitted to issue Agreed Value Policies excepting for policies covering vintage cars.

Insured’s Declared Value (IDV)

• The Insured’s Declared Value (IDV) of the vehicle is deemed to be the ‘SUM INSURED’ for the purpose of this tariff and it is fixed at the commencement of each policy period for each insured vehicle.

• The IDV of the vehicle is to be fixed on the basis of manufacturer’s listed selling price of the brand and model as the vehicle proposed for insurance at the commencement of insurance /renewal and adjusted for depreciation (as per schedule specified below).

• Schedule of Depreciation for Arriving at IDV • Age of the Vehicle % of Depreciation for Fixing IDV• Not exceeding 6 months 5%• Exceeding 6 months but not exceeding 1 year 15%• Exceeding 1 year but not exceeding 2 years 20%• Exceeding 2 years but not exceeding 3 years 30%• Exceeding 3 years but not exceeding 4 years 40%• Exceeding 4 years but not exceeding 5 years 50%• Depreciation on Parts for Partial Loss Claims: as provided by tarrif.

Basis of Premium Calculation

TARIFF FOR PRIVATE CAR• Insured’s Declared Value (IDV) of the

vehicle • Cubic Capacity• Geographical Zones

– Zone A: Ahmedabad, Bangalore, Chennai, Hyderabad , Kolkata, Mumbai, New Delhi and Pune.

– Zone B: Rest of India

• Age of the vehicle

SCHEDULE OF PREMIUM for Own Damage Cover

  ZONE B ZONE A 

Age

of

vehicle CUBIC CAPACITY CUBIC CAPACITY

Not exceed -ing

Exceed -ing 1000cc but not exceed -ing 1500 cc

Exceeed-ing 1500 cc

Not exceed -ing

Exceeding 1000cc but not exceed -ing 1500 cc

Exceeding 1500 cc

  1000 cc 1000 cc

Not exceeding

5 years 3.039 % on IDV

3.191 % on IDV

3.343 % on IDV

3.127 % on IDV

3.283 % on IDV

3.440 % on IDV

Exceeding 5 years but not exceeding 10

years

3.191 % on IDV

3.351 % on IDV

3.510 % on IDV

3.283 % on IDV

3.447 % on IDV

3.612 % on IDV

Exceeding 10 years

3.267 % on IDV

3.430 % on IDV

3.594 % on IDV

3.362 % on IDV

3.529 % on IDV

3.698 % on IDV

DISCOUNTS• No Claim Bonus• Automobile Association Discount• Discount for Vintage Car• Discount for Anti-Theft Devices Voluntary deductibles

VOLUNTARY DEDUCTIBLE

DISCOUNT

Rs. 2500 20% on the OD premium of the vehicle, subject to a maximum of Rs. 750/-

Rs. 5000 25% on the OD premium of the vehicle, subject to a maximum of Rs. 1500/-

Rs. 7500 30% on the OD premium of the vehicle, subject to a maximum of Rs. 2000/-

Rs. 15000 35% on the OD premium of the vehicle, subject to a maximum of Rs. 2500/-

No Claim Bonus • The entitlement of NCB follows the fortune of the original insured. • The percentage of NCB earned on a vehicle owned by an institution during the period when it was exclusively

operated by an employee should be passed on to the employee if the ownership of the vehicle is transferred in the name of the employee.

• In the event of transfer of insurance from one insurer to another insurer, the transferee insurer may allow the same NCB, which the insured would have received, from the previous insurer.

• If an insured vehicle is sold and not replaced immediately, or laid up, and the policy is not renewed immediately after expiry, NCB, if any, may be granted on a subsequent insurance, provided such fresh insurance is effected within 3 (three) years from the expiry of the previous insurance.

• On production of evidence of having earned NCB abroad, an insured may be granted NCB on a new policy taken out in India as per entitlement earned abroad, if policy is taken out in India within three years of expiry of the overseas insurance policy.

• No NCB can be allowed when a policy is not renewed within 90 days of its expiry. • NCB is to be allowed only when the vehicle has been insured continuously for a period of 12 months without any

break.

Period of Insurance % of NCB on OD premium

The preceding year 20 %

Preceding Two consecutive years 25 %

Preceding Three consecutive years 35 %

Preceding Four consecutive years 45 %

Preceding Five consecutive years 50 %

LIMITATIONS AS TO USE

• The Policy covers use of the vehicle for any purpose other than – Hire or Reward– Carriage of goods (other than samples or personal

luggage)– Organized racing – Pace making – Speed testing – Reliability Trials– Use in connection with Motor Trade

LIMITS OF LIABILITY FOR THIRD PARTY

a) Under Section II -1 (i) of the Package policy Under Section 1 (i) of the Liability Only Policy)

As per requirements of Motor Vehicle Act, 1988

b) Under Section II –1 (ii) of the Package policy

(Under Section 1(ii) of the Liability Only Policy)

Rs. 7.5 lakhs or Rs.6,000/-, where the proposer / insured opts to limit the TPPD liability to the statutory limit of Rs.6000/-.

CLAIMS

• Own (vehicle) Damage Claims• On receipt of notice of loss, the Insurer

checks whether the policy is in force, and that the vehicle is covered by the policy

• Loss is entered in claim Register• Claim form is issued to the Insured• Insured reqd. to furnish the estimate of repairs.• Second estimate from another Repairer

required if Insurer believes Moral Hazard/Integrity of the first repairer is in doubt.

CLAIMS

• Survey Report is examined

• Settlement effected accordinglyInsurer will authorise Repairer directly for repairs.Repairers are to collect Salvage/ Amount of Excess from the Insured if applicable Salvage is to be returned to InsurerIf the salvage is not returned,the value is deducted from the claim amount

CLAIMS

• On submission of final Bill of Repairer & Insureds’ Satisfaction Note on Repairs, payment is effected

• Sometimes Insured pays the Repairers and in turn receives the Insurance claim

• In both cases Discharge voucher is obtained • Claim payment is recorded in Claim Regr.,

Policy/Renewal Records • Amount paid, Salvage Amount received are also

indicated therein

CLAIMS

• Besides claim form, Survey Report, other documents for claim processing are:-

• Driving Licence • Police Report • Final Repair Bills • Permit • RC Book • Fitness certificate • Insureds’ satisfaction Note • Receipted Bill if paid by Insured

CLAIMS

• Such claims occur when Surveyor finds that• *Vehicle is beyond repairs• *Repairs are not economical. • Surveyor negotiates with Insured to assess the

loss on Total loss basis• Total loss claims are based on Market value of

vehicle immediately prior to loss• Insured will be paid cash and salvage taken over

by the Insurer• Salvage is disposed of by the Insurer thro tender

advertisements in Newspapers

CLAIMS

• Total loss also arises due to vehicle theft FIR(First Information Report) is lodged with the Police by the Insured Police Authorities register theft complaint

• They allot a Number- Station Diary Number• OR Crime Register Number• This Number is to be mentioned in claim

form.After reasonable time, if the police are not able to trace the vehicle, they issue Non-traceability certificate. This certificate is essential for settlement of claim

CLAIMS

• Documents to be furnished by the Insured are same as in Total loss claims If RC Book, Tax certificate are also stolen

• duplicate should be obtained & furnished Only additional documents are:

• Letter by Insured to RTO about theft

• Filing Non user form to avoid further

• Road Tax payment

TP CLAIMS

• TP claims are settled thro’ MACT• MACTs are set up by State Govts.,under sec.165 of MV

Act 1988• If there is a tribunal in an area, civil court has no

jurisdiction over claims coming under the tribunal.• Claim before tribunal should be filed before 6 months

from accident date.• Tribunal should specify the amount payable by the

Insurer, in the award• Tribunal should arrange to deliver within 15 days copy

of award to concerned parties (contd)

Procedure for TP claims

• On receipt of notice of claim, the Insurer entrusts the same to Advocate

• Full informn. about accident is obtained• Follg.documents are obtained:• Driving Licence,Police Report,Med.certificate• Details of Age, Income,Dependants etc• Details of Driver’s prosecution• Death certificate /Coroner’s certificate• A written statement is filed in MACT about

– facts of the case by the Advocate– Award amount paid against proper receipt.

Indian Insurance Industry • Ist Life Insurer in India-Bombay Mutual Life Insurance

Society -1870• Ist Non Life Insurer in India-Tritan Insurance Co. Ltd –

1850 Insurance Act, 1938• Nationalisation of Life Insurance Industry –

Incorporation of LIC – 1956• Nationalisation of General Insurance Business –

GIBNA, 1972• Opening up of Insurance Industry - IRDA Act, 1999• Public Grievances (Ombudsman) Rules, 1998• Regulations of IRDA• De-tariffing of Non Life (P&C) industry – January,

2007

INSURANCE MARKET GROWTH

Insurance Penetration (Premiums /

GDP)

Economic Development of Country

(GDP / Capita)

Phase I Phase II Phase III

Nascent Market

Nascent Market

Transitional Market

Transitional Market

Fully Mature Market

Fully Mature Market

India China

India China

Brazil South

Korea

Brazil South

Korea

US Japan UK

US Japan UK

S-Curve of S-Curve of Insurance Market Insurance Market

DevelopmentDevelopment

Source: Swiss Re Economic Research & Consulting, Swiss Re Sigma

Insurance Market Potential in India

Criteria US Brazil China India

Economic Strength

Regulatory Environment

Competitive Environment

Consumer Demand

Established Distribution

Phase Three Phase Two Phase One

Source – Swiss Re Sigma

1.77% 2.15%2.59% 2.26% 2.52%

0.55%0.56%

0.67%0.62%

0.65%

0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%

2000 2001 2002 2003 2004

Life Premium % GDP Nonlife Premium % GDP

Effects of liberalisation on critical Effects of liberalisation on critical parametersparameters

7,59510,504 12,275 14,425 16,9192,3382,573

3,1973,707

4,330

-

5,000

10,000

15,000

20,000

25,000

2000 2001 2002 2003 2004

Mil

lio

ns

Total Life Premium Total Nonlife Premium

7.6% 9.1%11.7% 12.9%

15.7%2.3%2.4%

3.0%3.5%

4.0%

0%

4%

8%

12%

16%

20%

2000 2001 2002 2003 2004

Life Premium Per Capita Nonlife Premium Per Capita

Total Premium Volume increased by a 5-year 20%

compound annual growth rate

Insurance Density increased by a 5-year 18% compound

annual growth rate

Insurance Penetration can be described as “embryonic”

at this stage

Sources: Swiss Re/sigma

Sources: EIU DataServices, Swiss Re/sigma

Peer Growth Potential ComparisonPeer Growth Potential Comparison

1.360.62

2.21

2.21

2.53

1.05

1.63

0.65

0

0.5

1

1.5

2

2.5

3

3.5

4

India Brazil Russia ChinaLife Premium % of GDP Nonlife Premium % of GDP

2004 Penetration2004 Penetration

Total Premium Volume 2001-2004 Total Premium Volume 2001-2004 compound annual growth ratecompound annual growth rate

Premium per Capita 2001-2004 Premium per Capita 2001-2004 compound annual growth ratecompound annual growth rate

25%

33%

10%

20%

0% 10% 20% 30% 40%

China

Brazil

25%34%

8%18%

0% 10% 20% 30% 40%

China

Brazil

High growth and low penetration

position India, Russia and China for

unlimited market development

potential. India has put in place the

liberalization and regulation process

to make it happen.

IndiaIndia

RussiaRussia

Insurance Penetration (% of Premium to GDP)

Market 2003 2004 2005

World 8.06 7.99 7.52

Asia 7.51 7.37 6.83

India 2.88 3.17 3.14

Steadfast growth of Industry(raising penetration levels)

Insurance Penetratin

3.142.712.32

1.93

3.26

2.88

3.17

1999 2000 2001 2002 2003 2004 2005

Year

Insurance Penetratin

Insurance Density (% of Premium to Total Population)

Market 2003 2004 2005

World 469.6 511.5 518.5

Asia 183.4 194.3 197.9

India 16.4 19.7 22.7

Steadfast growth of Industry(raising density levels)

22.7

8.5

9.911.5

14.716.4

19.7

1999 2000 2001 2002 2003 2004 2005

Year

Insu

ranc

e D

ensi

ty

Insurance Density

Financial Services-Still a long way to go

• Savings accounts 30• Insurance Policies 04• Shares and Mutual Funds 02• General Insurance 2.5• Health Insurance 0.2• Credit Cards 03• Debit Cards 5.6• Small Overdrafts 3.6• Entrepreneurial Credit 02Figures in % of population

Source – India today

Financial Savings of Household Sector

(% to GDP)

Item 2003-04 2004-05 2005-06

Bank Deposits

37.4 36.4 46.7

Shares &

Debenture

0.1 1.1 4.9

Insurance

Funds

13.7 16.0 14.2

Government-owned Companies

Privately-owned Companies

Non-life at a Promising StageNon-life at a Promising Stage

Sources: Swiss Re/sigma* government-owned

Despite its low penetration, non-life premiums have increased by a 14% CAGR from 1999-2004.

The private sector companies are growing aggressively and developing new products, sales and distribution infrastructure.

Private players have increased market share from 6% in 2002 to over 27% in 2005.

The four state companies have also benefited from competition, streamlining operations, investing in IT technology and launching new products.

Government-owned Companies

Privately-owned Companies

Gross Written PremiumsGross Written Premiums

20052005

20022002

Booming Insurance Industry

Premium

Growth

2003-04 2004-05 2005-06

Life

India

18.91% 24.31% 27.78%

Non Life

India

11.16% 12.09% 15.61%

Global 11.71% 9.70% 4.90%

Increase in Premium VolumesExpansion of market size

Increase in Premium Volumes

0.00

1000.00

2000.00

3000.00

4000.00

1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06

Year

Tota

l Pre

miu

m ($

)

Life Non Life Total

Growing Number Indication of furthering penetration

35.46

52.89

26.2128.63

25.37

47.2541.7343.56

2002-03 2003-04 2004-05 2005-06

Year

No

of N

ew P

olic

ies

sold

(m

illio

n)

Life Non Life

Market Share of Private players Indication of increasing acceptance levels

10.9110.81

16.91

5.79

3.25

8.523.85

7.91

2002-03 2003-04 2004-05 2005-06

Year

Mar

ket S

hare

of P

riva

te

Com

pani

es (N

o. o

f New

P

olic

ies

Issu

ed)

Life Non Life

Growth of Unit Linked FundsIncreased level of awareness

4220.77

18818.6

64720.33

0.48 1.76 5.31664.770.01

0

10000

20000

30000

40000

50000

60000

70000

2002-03 2003-04 2004-05 2005-06

Year

UL

Fu

nd

s u

nd

er

Man

ag

em

en

t ($

millio

n)

Total ULIP Funds % to Total Funds

Opening up of Insurance Sector Expectations

• Increased Coverage of population - including rural

• Choice of better products – with informed decision

• Economy of operations

• Better returns

• Service Excellence

Regulator as Developer

• Shouldering the responsibility of developing nascent insurance market

• Striking a right balance between developing and regulating the industry

• Protection of Policy holders’ Interests – Mission of IRDA

• Interests of policy holders prime objective while framing regulations

Regulatory role - consumer protection

• Insurance Advertisement and Disclosures regulations, 2000

• Protection of Policy holders’ interests regulations, 2002

• Maintenance of Minimum Solvency Margins• Introduction of cashless transactions – TPAs

Regulatory role - consumer protection

• Widening of Distribution Channels – Increased Insurance accessibility

• Regulatory norms for intermediaries– Licensing of Insurance (individual) Agents – 2000– Licensing of Corporate Agents – 2002– Insurance Brokers – 2002

• Entry of Banks under ‘Bancassurance’ model• Mandatory Training, Pre-recruitment exam before

licensing • Accreditation of Training Institutes – Upkeep of

training standards for intermediaries

Regulatory role - consumer protection

• Monitoring of underwriting policy through File and Use

• Constitution of Grievances Redressal Cell– Indication of operational inadequacies – triggering

regulatory intervention

• Committee to study existing grievances’ mechanism to formulate uniform guidelines

Development Oriented RegulationsSpread of Insurance to all sections

Rural and Social Sector Obligations

Rural Sector - Cultivators

- Agri labourers

- Rural assets

Social Sector - Unorganised sector

- BPL population

- Persons with disabilities

- Informal sector

Rural and Social Sector Obligations

• Life Insurers – 7,9,12,14,16 & 18% of total policies in first six years of operation as rural obligations

• General Insurers – 2,3 & 5% of total gross premium in I, II and subsequent years as rural obligations

• Five, Seven, Ten, Fifteen, Twenty and Twenty five thousand of lives as social sector obligations by all insurers in first six years of operation

Development Oriented RegulationsSpread of Insurance through Micro

Insurance • Micro Insurance Agency by agreement – A

relaxation from pre licensing training/test• Local Institutions as MI agents – Helps in

spread of Insurance awareness• Micro Insurance Products subject to File and

Use procedure – Expected to be self supportive

• Issuance of documents in vernacular languages – to reach the targeted

• Simplicity of forms – Avoidance of technical jargons desired

Grievances Redressal Mechanism Ombudsman

• Introduction of Insurance Ombudsman – 1998

• A quasi judicial mechanism – Empowering adjudication of disputes

• Adjudication limited to personal lines of business – A limit of Rs 2 millions contract value

• Award binding on Insurer

Insurance Education

• Lower level of insurance awareness• Insurance not part of academic curricula• Market dynamics weigh on insurance education • Constitution of standalone Insurance academic

institution of International standards– IIRM – IIRM International School of Actuarial Sciences– Distance Education programmes

Insurance Awareness Programmes

• Programmes in Radio and Television – In 11 regional languages

• Publicity campaign in de tariffed scenario

• Efforts to standardise policy documents, proposal forms, sales literatures

• Press Releases

Role of Insurers

• Simplified policy wordings – Avoidance of information asymmetry

• Updated web portals – premium calculator, rates and conditions

• 24 hours toll free call numbers • Implementation of advanced Technologies

Role of Insurers

• Grievances Redressal cells – Constitution of committees with an independent director

• Claims review committees

• Introduction of on-line payments

• Representatives of consumer activists, policy holders in the board

Increased Public participation

• Seminars by voluntary organisations

• Works shops on health insurance, Micro Insurance

• Consumers’ organisations

• Notices under Right to Information Act