MOTOR insurance-3

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MOTOR INSURANCEMOTOR INSURANCE

Day 3Day 3

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Classes of VehiclesClasses 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 useLimitations 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 FACTORSRATING FACTORS

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Rating Factors Rating Factors (Pvt Cars & Two Wheelers)(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)1) Insured Declared valueInsured 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 SCHEDULE OF DEPRECIATION FOR

ARRIVING AT IDVARRIVING AT IDV AGE OF THE VEHICLE % OF DEPRECIATION

FOR FIXING IDV

Not exceeding 6 months 5%

Exceeding 1 year but not exceeding 2 years

20%

Exceeding 2 years but not exceeding 3 years

30%


40%


50%

IDV for vehicle above 5 years & obsolete models will be mutually agreed upon by the company and insured as per market value

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Example for IDV CalculationExample for IDV Calculation

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

What is the IDV?What is the IDV?

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Example for IDV CalculationExample for IDV Calculation

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

What is the IDV?What is the IDV?

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2. Cubic Capacity2. Cubic Capacity The size of an engine is referred to as its

cubic capacity

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3.Geographical Zones3.Geographical Zones

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

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

Zone B: Rest of IndiaZone B: Rest of India

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

Zone AZone A Chennai, Delhi / New Delhi, Chennai, Delhi / New Delhi, Kolkata, MumbaiKolkata, Mumbai

Zone BZone B All other State CapitalsAll other State Capitals Zone CZone C Rest of IndiaRest of India

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4. Age of the vehicle4. Age of the vehicle

Refers to the year of manufacture of the Refers to the year of manufacture of the vehiclevehicle

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5. Claims Experience5. Claims ExperienceNo Claim BonusNo Claim Bonus

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PREMIUM RATESPREMIUM 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 CoverPremium Rates for Liability Only Cover

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Premium rates for Additional CoversPremium rates for Additional Covers

Optional Personal Accident Cover for persons other than Owner-Optional Personal Accident Cover for persons other than Owner-Driver, in Pvt Cars is limited to maximum of Rs. 2 lacs. per person. Driver, in Pvt Cars is limited to maximum of Rs. 2 lacs. per person. (Premium payable Rs.50 per lac per person)(Premium payable Rs.50 per lac per person)

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Steps in Premium CalculationSteps in Premium Calculation

Step IStep I : Find out the IDV : Find out the IDV (IDV = Invoice price – depreciation)(IDV = Invoice price – depreciation)

Step IIStep II : Find out the Basic OD, i.e., IDV * OD Rates : Find out the Basic OD, i.e., IDV * OD Rates

(OD Rates are based on CC & YOM)(OD Rates are based on CC & YOM)

Step III : Deduct NCB from the Basic ODStep III : Deduct NCB from the Basic OD

Step IV : Less Commercial Discount, if anyStep IV : Less Commercial Discount, if any

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

Step VI: Add PA premium for Owner Driver Rs.100 & Legal Step VI: Add PA premium for Owner Driver Rs.100 & Legal Liability premium – Rs.25 Liability premium – Rs.25

Step VII : Add Service Tax @ 10.3% to the Net PremiumStep VII : Add Service Tax @ 10.3% to the Net Premium

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PREMIUM CALCULATIONPREMIUM CALCULATION

Step I : Find out the IDVStep I : Find out the IDVIDV = Invoice price – depreciationIDV = Invoice price – depreciation

For E.g.: Honda City 1.5 GXI, 2007 Model,For E.g.: Honda City 1.5 GXI, 2007 Model,Invoice Price is 6,90,000Invoice Price is 6,90,000

IDV = (6,90,000 – 30%)IDV = (6,90,000 – 30%)I.e., 4,83,000I.e., 4,83,000

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Step II : Find out the Basic OD Premium Step II : Find out the Basic OD Premium I.e., IDV * OD Rates I.e., IDV * OD Rates

(OD Rates are based on CC & YOM)(OD Rates are based on CC & YOM)

For E.g.: Honda City 1.5 GXI, 2007 Model,For E.g.: Honda City 1.5 GXI, 2007 Model,IDV taken is 4,83,000IDV taken is 4,83,000

Basic OD Premium = IDV * OD RateBasic OD Premium = IDV * OD RateI.e., 4,83,000 * 3.191% = 15,412I.e., 4,83,000 * 3.191% = 15,412

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Step III : Deduct NCB from the Basic ODStep III : Deduct NCB from the Basic OD

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

No Claims, IDV :4,83,000,Basic OD = No Claims, IDV :4,83,000,Basic OD = 15,41215,412

OD after deducting NCB = 15,412 – 25%OD after deducting NCB = 15,412 – 25%

I.e., 11,559I.e., 11,559

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Step IV: Less Commercial Discount, if anyStep IV: Less Commercial Discount, if any

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

For E.g.: Honda City 1.5 GXI, 2007 Model, For E.g.: Honda City 1.5 GXI, 2007 Model, No Claims, IDV :4,83,000,Basic OD = 15,412, No Claims, IDV :4,83,000,Basic OD = 15,412,

OD after deducting NCB = 11,559OD after deducting NCB = 11,559

Add TP Premium = 11,559 + 800Add TP Premium = 11,559 + 800 = 12,359= 12,359

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Step VIStep VI : Add premium for : Add premium for

Compulsory PA Cover for Owner Driver Compulsory PA Cover for Owner Driver Rs.100 & Rs.100 &

Legal Liability premium – Rs.25Legal Liability premium – Rs.25

In the earlier E.g., 12,359 + 100 + 25 = 12,484 – In the earlier E.g., 12,359 + 100 + 25 = 12,484 – This the net premium before service taxThis the net premium before service tax

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

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

This the Final premium payableThis the Final premium payable

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Check your understandingCheck your understanding

Toyota Innova 2.5 VToyota Innova 2.5 V Showroom Price : 10 LacsShowroom Price : 10 Lacs Year : 2007Year : 2007 No claims till dateNo claims till date

What is the Premium payable?What is the Premium payable?

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Maruti 800Maruti 800 YOM: 2008YOM: 2008 Showroom Price: 1.6 LacsShowroom Price: 1.6 Lacs NCB: There was a claim recentlyNCB: There was a claim recently

What is the premium payable?What is the premium payable?

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Maruti 800Maruti 800 YOM: 2008YOM: 2008 Showroom Price: 1.6 LacsShowroom Price: 1.6 Lacs NCB: No Claims till dateNCB: No Claims till date The underwriter has agreed for 20% The underwriter has agreed for 20%

commercial discount apart from the NCBcommercial discount apart from the NCB


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Toyota Innova 2.5 VToyota Innova 2.5 V Showroom Price : 10 LacsShowroom Price : 10 Lacs Year : 2007Year : 2007 No claims till dateNo claims till date There was ownership transfer a month backThere was ownership transfer a month back

What is the Premium payable?What is the Premium payable?

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Maruti 800Maruti 800 YOM: 2007YOM: 2007 Showroom Price: 1.6 LacsShowroom Price: 1.6 Lacs NCB: No Claims till dateNCB: No Claims till date The insured could not renew the policy in The insured could not renew the policy in

2008. Hence there is a break in 2008. Hence there is a break in insurance(1year)insurance(1year)


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Please Note:Please Note:

Electrical AccessoriesElectrical Accessories : 4% of the value of the : 4% of the value of the accessories should be added in the OD Partaccessories 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 RisksSpecial Risks

Motor Trade Road Transit Risks, Motor Trade Road Transit Risks, Motor Trade Road Risks Motor Trade Road Risks

& & Motor Trade Internal RisksMotor Trade Internal Risks

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Motor Trade Road Transit RiskMotor Trade Road Transit Risk

To cover the transit of newly manufactured To cover the transit of newly manufactured vehicles to the automobile dealer’s outlets vehicles to the automobile dealer’s outlets located in various parts of the countrylocated in various parts of the country

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Motor Trade Road RiskMotor Trade Road Risk This is designed for a Motor – Trader (an This is designed for a Motor – Trader (an

Automobile dealer, Garage Proprietor or Automobile dealer, Garage Proprietor or Repairer)Repairer)

Provides cover during inspection & testing of Provides cover during inspection & testing of the vehicles on the road before and after repair the vehicles on the road before and after repair (When the vehicles are handed over for (When the vehicles are handed over for repairs)repairs)

Provides cover during demonstration & trial Provides cover during demonstration & trial run (new vehicles)run (new vehicles)

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Motor Trade Internal RiskMotor Trade Internal Risk To cover the garage risks in the Motor Trader’s To cover the garage risks in the Motor Trader’s

premises and the work carried on there in.premises and the work carried on there in. The risk exposure can be;The risk exposure can be;

Accidental Physical damage to the vehicle while stored Accidental Physical damage to the vehicle while stored in the garage premisesin the garage premises

Negligence of the Motor trader or his employees Negligence of the Motor trader or his employees resulting in damage to the vehicleresulting in damage to the vehicle

Accidental Death or Bodily injury to others due to the Accidental Death or Bodily injury to others due to the motor vehicle accident in the premisesmotor vehicle accident in the premises

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When does the insurance company ask for When does the insurance company ask for

proposal form from customer?proposal form from customer? Proposal forms are required in the all the following Proposal forms are required in the all the following

situations situations New Business New Business Other Company renewal Other Company renewal On Transfer of Interest On Transfer of Interest On conversion of Liability Only cover to Package On conversion of Liability Only cover to Package

PolicyPolicy Change / Substitution of the vehicleChange / Substitution of the vehicle On alteration / improvement of vehicle either during On alteration / improvement of vehicle either during

the currency of the policy or during the renewalthe currency of the policy or during the renewal

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When do pre acceptance inspections have to When do pre acceptance inspections have to

be carried out?be carried out? Customer has to produce the vehicle for inspection Customer has to produce the vehicle for inspection under the following circumstances: under the following circumstances:

In case of break in insurance In case of break in insurance In case of conversion of TP cover to OD cover In case of conversion of TP cover to OD cover In case of covering Imported vehicles In case of covering Imported vehicles In case of fresh payment received after cheque In case of fresh payment received after cheque

bounce bounce

The authorized person from the insurance company The authorized person from the insurance company will inspect the vehicle.will inspect the vehicle.

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What are the documents required for issuing What are the documents required for issuing

the policy?the policy?

For Fresh & Roll over casesFor Fresh & Roll over cases Proposal formProposal form Previous Policy CopyPrevious Policy Copy RC CopyRC Copy PaymentPayment

For own renewalsFor own renewals Renewal Reply Form (Changes in the coverages if any, Renewal Reply Form (Changes in the coverages if any,

can be incorporated in the renewal reply form)can be incorporated in the renewal reply form) PaymentPayment

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Premium computation-EgsPremium computation-Egs

Maruti AltoMaruti Alto Showroom price – 2,35,000Showroom price – 2,35,000 2005 model (cc – less than 1000)2005 model (cc – less than 1000) No claims till dateNo claims till date What is the premium payable?What is the premium payable?

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

commercial discount?commercial discount?

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

commercial discount?commercial discount?

Documents

MOTOR insurance-3