MOTOR INSURANCE

Day 3

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Classes of Vehicles

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 Definition of Private Vehicle:
A vehicle used for private purpose i.e. used for
personal, social & domestic purpose and also
professional / personal business purpose
(excluding carriage of goods)

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Limitations to use
If the vehicle is used for any of the purposes
mentioned below, it is not covered under a
Private Vehicle motor policy:

 Hire and Reward

 Carriage of goods
 Organized racing
 Speed Testing etc

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 Definition of Commercial Vehicle:
Any vehicle which is used for hire & reward
(other than for private hire) is termed as a
commercial vehicle

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 PREMIUM CALCULATION

In this module, we will look at how motor

insurance premium is calculated.
We will examine the various parameters that
need to be taken into account while computing
the premium.
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RATING FACTORS

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 Rating Factors
(Pvt Cars & Two Wheelers)

 Insured's Declared Value

(IDV = Showroom Price - Depreciation)
 Cubic Capacity (CC) of the Vehicle
 Geographical Zone
 Age of the Vehicle (Year of mnfg)
 Claims Experience

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 1) Insured Declared value
 IDV is to be fixed on the basis of
manufacturer’s listed selling price of the brand
and the model, less depreciation (as per the
schedule) and is fixed at the commencement of
each policy period for the each insured vehicle

 IDV = Present Invoice Value (-) Depreciation

based on the age of the vehicle.
(Invoice Value = Vehicle Cost + Sales Tax)
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 SCHEDULE OF DEPRECIATION FOR
ARRIVING AT IDV
AGE OF THE VEHICLE % OF DEPRECIATION
FOR FIXING IDV
Not exceeding 6 months 5%
Exceeding 1 year but not 20%
exceeding 2 years
Exceeding 2 years but not 30%
exceeding 3 years
Exceeding 3 years but not 40%
exceeding 4 years
Exceeding 4 years but not 50%
exceeding 5 years
IDV for vehicle above 5 years & obsolete models will be mutually
agreed upon by the company and insured as per market value 10
 Example for IDV Calculation

 Make – Maruti
 Model – Alto
 Sub model – LXI
 YOM – 2009
 Showroom Price – Rs. 3,06,022/-

What is the IDV?

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 Example for IDV Calculation

 Make – Maruti
 Model – Alto
 Sub model – LXI
 YOM – 2007
 Showroom Price – Rs. 3,06,022/-

What is the IDV?

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 2. Cubic Capacity
 The size of an engine is referred to as its
cubic capacity

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 3.Geographical Zones
 Private Cars/ Motorized Two Wheelers /
Commercial Vehicles rateable under Section 4.C.1
and C.4

 Zone A: Ahmedabad, Bangalore, Chennai,

Hyderabad , Kolkata, Mumbai, New Delhi and
Pune.

 Zone B: Rest of India

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 Commercial Vehicles excluding vehicles
rateable under Section 4. C.1 and C.4.

 Zone A Chennai, Delhi / New Delhi, Kolkata,

Mumbai
 Zone B All other State Capitals
 Zone C Rest of India

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 4. Age of the vehicle

 Refers to the year of manufacture of the

vehicle

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 5. Claims Experience
No Claim Bonus

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PREMIUM RATES

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Own Damage Premium Rates – Private Car

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Own Damage Premium Rates – 2 Wheeler

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Premium Rates for Liability Only Cover

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 Premium rates for Additional Covers

 Optional Personal Accident Cover for persons other than Owner-

Driver, in Pvt Cars is limited to maximum of Rs. 2 lacs. per person.
(Premium payable Rs.50 per lac per person)
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 Steps in Premium Calculation
Step I : Find out the IDV (IDV = Invoice price – depreciation)
Step II : Find out the Basic OD, i.e., IDV * OD Rates
(OD Rates are based on CC & YOM)
Step III : Deduct NCB from the Basic OD
Step IV : Less Commercial Discount, if any
Step V : Add TP Premium
(TP Premium is based on the CC of the vehicle)
Step VI: Add PA premium for Owner Driver Rs.100 & Legal
Liability premium – Rs.25
Step VII : Add Service Tax @ 10.3% to the Net Premium

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 PREMIUM CALCULATION
Step I : Find out the IDV
IDV = Invoice price – depreciation

For E.g.: Honda City 1.5 GXI, 2007 Model,

Invoice Price is 6,90,000

IDV = (6,90,000 – 30%)

I.e., 4,83,000

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Step II : Find out the Basic OD Premium
I.e., IDV * OD Rates
(OD Rates are based on CC & YOM)

 For E.g.: Honda City 1.5 GXI, 2007 Model,

IDV taken is 4,83,000
Basic OD Premium = IDV * OD Rate
I.e., 4,83,000 * 3.191% = 15,412

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 Step III : Deduct NCB from the Basic OD

 For E.g.: Honda City 1.5 GXI, 2007 Model,

No Claims, IDV :4,83,000,Basic OD =
15,412

OD after deducting NCB = 15,412 – 25%

I.e., 11,559

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 Step IV: Less Commercial Discount, if any

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Step V : Add TP Premium
(TP Premium is based on the CC of the vehicle)

For E.g.: Honda City 1.5 GXI, 2007 Model,

No Claims, IDV :4,83,000,Basic OD = 15,412,
OD after deducting NCB = 11,559

Add TP Premium = 11,559 + 800

= 12,359

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 Step VI : Add premium for


Compulsory PA Cover for Owner Driver

Rs.100 &
Legal Liability premium – Rs.25

In the earlier E.g., 12,359 + 100 + 25 = 12,484 –

This the net premium before service tax

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 Step VII: Net Premium + Serv. Tax @
10.3%

In the earlier E.g., 12,484 + 10.3% = 13,769

This the Final premium payable

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 Check your understanding

 Toyota Innova 2.5 V

 Showroom Price : 10 Lacs
 Year : 2007
 No claims till date
What is the Premium payable?

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 Check your understanding
 Maruti 800
 YOM: 2008
 Showroom Price: 1.6 Lacs
 NCB: There was a claim recently
What is the premium payable?

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 Check your understanding
 Maruti 800
 YOM: 2008
 Showroom Price: 1.6 Lacs
 NCB: No Claims till date
 The underwriter has agreed for 20%
commercial discount apart from the NCB
What is the premium payable?

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 Check your understanding
 Toyota Innova 2.5 V
 Showroom Price : 10 Lacs
 Year : 2007
 No claims till date
 There was ownership transfer a month back
What is the Premium payable?

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 Check your understanding
 Maruti 800
 YOM: 2007
 Showroom Price: 1.6 Lacs
 NCB: No Claims till date
 The insured could not renew the policy in
2008. Hence there is a break in
insurance(1year)
What is the premium payable?
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Please Note:
 Electrical Accessories : 4% of the value of the
accessories should be added in the OD Part
 CNG/LPG fuel : 4% of the value of the kit should be
added in the OD and Rs. 60 under liability section
 Inbuilt accessories : No additional premium charged
for inbuilt accessories. The cost of the accessories are
taken into account while calculating the IDV
 Optional PA Cover for passengers: Max up to Rs.
2,00,000/- SI per passenger, Addnl premium payable
– Rs.50 per lac

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 Special Risks

Motor Trade Road Transit Risks,

Motor Trade Road Risks
&
Motor Trade Internal Risks

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 Motor Trade Road Transit Risk

 To cover the transit of newly manufactured

vehicles to the automobile dealer’s outlets
located in various parts of the country

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 Motor Trade Road Risk
 This is designed for a Motor – Trader (an
Automobile dealer, Garage Proprietor or
Repairer)
 Provides cover during inspection & testing of
the vehicles on the road before and after repair
(When the vehicles are handed over for
repairs)
 Provides cover during demonstration & trial
run (new vehicles)

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 Motor Trade Internal Risk
 To cover the garage risks in the Motor Trader’s
premises and the work carried on there in.
 The risk exposure can be;

 Accidental Physical damage to the vehicle while stored

in the garage premises
 Negligence of the Motor trader or his employees
resulting in damage to the vehicle
 Accidental Death or Bodily injury to others due to the
motor vehicle accident in the premises

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 When does the insurance company ask for
proposal form from customer?
Proposal forms are required in the all the following
situations
 New Business
 Other Company renewal
 On Transfer of Interest
 On conversion of Liability Only cover to Package
Policy
 Change / Substitution of the vehicle
 On alteration / improvement of vehicle either during
the currency of the policy or during the renewal

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 When do pre acceptance inspections have to
be carried out?
Customer has to produce the vehicle for inspection
under the following circumstances:

 In case of break in insurance

 In case of conversion of TP cover to OD cover
 In case of covering Imported vehicles
 In case of fresh payment received after cheque bounce

The authorized person from the insurance company

will inspect the vehicle.

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What are the documents required for issuing
the policy?
For Fresh & Roll over cases
 Proposal form
 Previous Policy Copy
 RC Copy
 Payment
For own renewals
 Renewal Reply Form (Changes in the coverages if any,
can be incorporated in the renewal reply form)
 Payment

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 Premium computation-Egs
 Maruti Alto
 Showroom price – 2,35,000
 2005 model (cc – less than 1000)
 No claims till date
 What is the premium payable?

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 Maruti Alto
 Showroom price – 2,35,000
 2005 model (cc – less than 1000)
 No claims till date
 What is the premium payable with 25%
commercial discount?

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 Maruti Alto
 Showroom price – 2,35,000
 2005 model (cc – less than 1000)
 No claims till date
 There was ownership transfer recently
 What is the premium payable with 25%
commercial discount?

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