Motor Insurance and you
By Ravi Sumithraarachchi - Senior Manager-Motor Insurance
Courtesy : www.dailymirror.lk of 11th November 2009
The first insurance policies were issued towards the end of the nineteenth century. At this experimental stage, there were insurance company failures, the first occurring in 1910.
The 1st world war hastened technological de
velopment because there was an obvious need for a mode of transport with the attributes of mobility, speed and efficiency. At the end of the war, popular motoring really began, in an era of cheap, light ‘baby’ cars. Consequently, motoring became a worldwide pursuit.There was a corresponding increase in personal injury litigation, the result of the fact that a proportion of motorists were uninsured. Those insurers who did provide motor insurance cover tended to incorporate the handling of the business within their accident department. As the motor account grew, it was deemed necessary to develop it as a separate class.
In drawing up this new type of policy insurers were influenced by their experience of fire, theft and liability insurance and as a result they placed more emphasis on the subject matter (the vehicle) for rating purposes than they did upon the driver.
Nowadays, they give more weight to the driver and his experience, particularly to the young driver. The early years of the 20th century saw the formation of insurance companies in which the main emphasis was upon motor insurance. The experience of fire, theft and liability insurance, however, influenced the development of composite insurance companies and when motor vehicles appeared on the roads in larger number after the 1st world war, motorists placed most of their business with the larger, composite offices.
Insurance was introduced to Sri Lanka in the early 1930s when foreign insurers opened branches and Agencies following on the opening up of mainly British business houses in the developing Colony that was Ceylon. With the growth of business the market gradually developed till 1962/64-the period over which the insurance industry was nationalised. At this time there were 50 insurance companies doing active business in Sri Lanka.
By the late 1940s the Ceylon Accident Insurers Association had come to realise that their joint and several interests would best be served if they were to agree to adopt a more or less standard set of guidelines and basic rates for motor insurance. Thus the motor tariff came into operation within the framework of the Ceylon Accident Insurers Association. However, the Motor Insurance Tariff has now been lift off (after August 2002) in order to provide a competitive market.
Motor Insurer is, without doubt, the class of insurance business most amenable to standardisation and yet, at the same time, it provides one of the widest range of factors calling for individual appreciation assessment, and decision. With the large number of motor vehicles in use in Sri Lanka there are bound to be sound reasons for grouping the vehicles according to their usage for rating purposes.
(1) Every person is required by law to affect Motor Insurance if such person intends to use a motor vehicle on the road or where people have access. The insurance policy must be in force and must fulfil certain legal requirements. A Certificate of Insurance must be issued in terms of the Motor Traffic Act. There are special regulations concerning Motor Traffic. An action lies for breach of statutory duty.
(2) As in other types of insurance it is essential for the insured to have an insurable interest in the subject matter.
(3) The insured is required to answer all the questions in the Proposal Form either affirmative or negative. He is under a duty to disclose to the insurers all material facts to the risk proposed for insurance and should not make any misrepresentations. The completed Proposal Form will be the basis of contract between the insured and the insurer.
(4) Various conditions are set out in the body of the Policy, while some specific conditions are mentioned in the Schedule of the Policy. The Policy may cover injury to the insured, loss of or damage to the insured vehicle, also cover a person driving with the consent of the insured or the insured himself whilst he is driving cars other than the insured vehicle.
(5) As in all insurance Policies, Motor Insurance Policy also contains "General Exceptions" which excludes/restricts liability. The insured is under a duty to observe the "Conditions" imposed by the Policy and these are conditions precedent to liability. Any breach of a warranty or condition of the Policy would make the insurance contract null and void.
(6) Insurance against liability in respect of the death of or personal injury to third parties are generally compulsory.
(7) In certain circumstances a third party has a direct right to claim against the insurers in respect of injuries, which he has suffered by reason of negligent driving.
Choosing motor insurance
If you drive your vehicle on the road, or leave it parked in the street, the law says that you must have motor insurance. It is an offence not to insure your motor vehicle. Before you buy motor insurance, decide who will be driving your car, and how much cover you would like. There are three main types of motor insurance:
Third party insurance
This is the minimum amount of insurance cover that you must have for your vehicle. Third party insurance only covers you for damage to someone else's vehicle or property, or injury to someone else in an accident which involves your car. If your vehicle is damaged in the accident you will have to pay for the repairs yourself.
Third party, fire and theft insurance
This includes third party cover and, additionally, damage to or loss of your car by fire or theft.
Comprehensive insurance
This includes third party, fire and theft insurance. In addition, it will also pay for repairs to your car.
The cost of an insurance policy is called a 'premium'. Ask for quotes from several insurers to help you to get the best deal for your circumstances. You will need to compare:
- What each policy covers, and any exclusions (risks which are specifically excluded, for example, allowing private usage only)
- The no claims bonus which increases for every year that no claims are made on your policy, up to a maximum amount. Most insurers will let you transfer the discount, if you want to change your insurer. You will also need to compare the amount by which your no claims bonus would be reduced if you made a claim.
Things to remember
- You must give your insurer or the person who sells you the insurance as much information as you can about yourself and your vehicle. You must, for example, tell your insurer or the person who sells you the insurance about any medical condition which could affect your driving ability, or any motoring accidents, even if you have not claimed on your insurance as a result. The information you give will affect the level of your premium, and whether your insurer will pay out on any claim.
- You must tell your insurer, in writing, about any change in your circumstances. You should tell them as soon as the change occurs, and not wait until it's time to renew your policy.
- If the vehicle has been bought on credit, the finance company will usually insist that it is insured in the name of the person who has taken out the credit agreement.
- Motor insurance policies normally run for a year. Your insurer does not have to send you a notice reminding you to renew, but most insurers do send out reminders.
- When you take out or renew motor insurance, if you are been given cover note, this will be valid for 30 days or until you get the insurance certificate. It is an offence to drive without a cover note or insurance certificate, so do not rely only on a telephone conversation where someone has told you that you are covered.
- You can cancel an insurance policy if you sell your vehicle or any time if you wish. You should check your policy to see if you have a right to a refund of your premium.
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