Motor insurance was
first launched in U. K.. The first car
was manufactured in 1984and the first
motor insurance policy was issued in 1985. It covered liabilities to third party. In 1889, accidental damage to
car in 1901 burglary and
fire were added. Thus the progress made is found is in comprehensive policy of
today. In 1903, the car and General Insurance Corporation Ltd. Was started and
many companies were started later. After
World war, number of card and car
accidents increased. The victims of the car accidents were not given any compensations. So the
third party insurance was made mandatory (The Road Traffic Act 1930, 1934, and
1969) (In Motor Vehicles) Act was enacted in 1939. The act was the same as that of U.
K. The only differences
is that in U. K. tariff is withdrawn, but India’s tariff governs
the insurance.
FUNDAMENTAL PRINCIPALS OF MOTOR INSURANCE
The basic principals
applicable to motor insurance are
the same as they are in property and liability insurance. But the applications of these
principles to automobile insurance is accepted as a specialised problem requiring a special contract. However
let us recall the principles below in brief: (1) Utmost good faith: Motor insurance contracts are contracts of utmost
good faith . The proposer is liable to disclose all the material facts
relating to the motor vehicle to insurer. For this purpose the proposer is
a given a proposal from and he is asked
to give answers for all the questions asked in it. The answers given by the proposer becomes warranties or promises. So the
answers must be true to the language and
must be correct. Any incorrect answer
on any matter will make the contract viodable. Some examples of material facts are: the type of vehicle,
the geographical area of use, the
physical health of driver the driving
history, traffic convictions and post loss experience etc. Many of these
provisions are now regulated by motor vehicle Act 1939
. (2)
INSURABLE INTEREST: It refers to legal right to insure. The essentials of
insurable interest are: (a) Existence of motor vehicle exposed to damage or liability : (b) such motor
vehicle must be the subject matter of insurance: and ( C ) the insured must be
in such a position that he shall suffer by loss or damage or benefit by the
safety of the motor vehicle. Generally the following parties are expected to
have a
n insurable
interest. (a) INSURED: As a owner of vehicle the insured
suffers a loss if his vehicle is damaged or from a legal liability to
third party who suffers a loss for his
negligence. (B) OTHER THAN INSURED: The
driver of the vehicle may create liability for insured. In effect, the insured
becomes the agent for the drivers and insured indemnifies him. ( C ) FINANCIER: In hire purchase agreement,
the financier’s interest is insurable. In case the vehicle is lost
or damaged, the financier can get compensation.
(d) MOTOR TRADER: The garage proprietors as bailees have
insurable interest for customer’s loss or damage. (3) INDEMNITY: The objects of this principle
is to place the insured after a loss in the same financial position as far as
possible, as he occupied immediately
before the loss. The effect of this principle is to prevent the insured
from making a profit out of his loss or gaining any benefits or advantage.
Accordingly to this principle, the
insurer is liable to pay the actual value of loss or sum insured whichever is
less in case of total loss to insured. If old parts are replaced by new a
suitable depreciation is charged on new parts. Insurer may repair or replace or
pay cash as it likes. Liability to third party is limited to policy sum Legal costs are also indemnified.
(4) SUBROGATION AND CONTRIBUTION: Subrogation is transfer of rights and remedies of the insured to the insurer who has
indemnified the insured in respect of
the loss. It arises only when the third party is responsible for damage.
Insurer may exercise the insured’s right to recover damages. Generally they the
right arises after payment of damage. Contributions refers to sharing of damage between
co-insurers. It is done in the proportion
the insurer’s share bears to total sum of all insurers
(5) PROXIMATE CAUSE: The insurers are liable to pay compensations only if loss is caused by a peril most proximate or the nearest to damage and if it is insured
against. It is applicable to third party claims also.