My Black Book

October 14, 2017 | Author: Almas Mullaji | Category: Vehicle Insurance, Insurance, Subrogation, Indemnity, Private Law
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Introduction A motor insurance or an auto insurance or more popularly known as a car insurance, is an insurance cover which is meant to protect your vehicle against the losses incurred due to unforeseen instances. It covers you from the risk of loss from theft, loss from accidents or any subsequent liabilities. Motor insurance can be generally classified into 3 broad categories. Car insurance: It covers all kinds of losses or damage by accident, fire, any kind of natural calamities, theft and the third party claims. Two wheelers insurance: This type of auto insurance is meant for the two wheelers. It provides protection to the vehicle from the loss or damage from natural calamities like earthquakes, floods, hurricanes and man-made calamities like fire, landslide etc. Commercial vehicle insurance: It covers all those vehicles which are not used for personal purpose. Vehicles like trucks, passenger buses, heavy commercial vehicle, light commercial vehicles, agricultural vehicles, multi-utility vehicles, ambulances etc are covered under this type of insurance. Motor insurance is also mandatory by the law. It is a legal requirement in India to have insured a minimal level of insurance protection before driving any motor vehicle.

History of insurance industry In some sense we can say that insurance appeared simultaneously with appearance of human society. In earlier economies, we can see insurance in the form of people helping each other. For example, if a house is burnt, the members of the community help build a new one. Should the same thing happen to ones neighbor, the other neighbors must come to help? Otherwise, neighbors will not receive help in the future. Insurance in the modern sense, started as a methods of transferring or distributing risk were practiced by Chinese and Babylonian traders as long ago as the 3rd and 2ndmillenniaBC, respectively. Chinese merchants traveling treacherous river rapids would redistribute their cargo across many vessels to limit the loss due to any single vessels capsizing. The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and practiced by early Mediterranean sailing

merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lenders guarantee to cancel the loan should the shipment be stolen. Greek monarchs were the first to insure their people and made it official by registering the insuring process in governmental notary offices. They invented the concept of the „general average‟. Merchants whose goods were being shipped together would pay a proportionally divided premium which would be used to reimburse any merchant whose goods were jettisoned during storm or sinking of the vessel in the sea. The Greeks and Romans introduced the origins of health and life insurance c. 600 AD when they organized guilds called “benevolent societies” which cared for the families and paid funeral expenses of members upon death. Guilds in the middle Ages served a similar purpose. Before insurance was established in the late 17th century, “friendly societies” existed in England, in which people donated amounts of money to a general sum that could be used for emergencies. Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in Greeks rulers in the 14th century, as were insurance pools backed by pledges of landed estates. These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance. Insurance became far more sophisticated in post-Renaissance Europe, and specialized varieties developed. Insurance as we know it

today can be traced to the Great Fire of London, which in 1666 A.D devoured 13,200 houses. In the aftermath of this disaster, XXX holasBarbon opened an office to insure buildings. In 1680, he established England’s first fire insurance company, “The Fire Office,” to insure brick and frame homes. The first insurance company in the United States underwrote fire insurance and was formed in Charles Town (modern-day Charleston), South Carolina, in 1732. Evolution of insurance industry in India–Important milestones In India, insurance has a deep-rooted history. It finds mention in the writings of Manu (Manusmrith), Yagnavalkya (Dharmasastra) and Kautilya (Arthasastra). The writings talk in terms of pooling of resources that could be re-distributed in times of calamities such as fire, floods, epidemics and famine. This was probably a pre-cursor to modern day insurance. Ancient Indian history has preserved the earliest traces of insurance in the form of marine trade loans and carriers‟ contracts. Insurance in India has evolved over time heavily drawing from other countries, England in particular.

Year 1818

Event The advent of life insurance business in India with the establishment of the Oriental Life

1834 1850

Insurance Company in Calcutta. Oriental Life Insurance Failure The advent of General Insurance in India with the establishment of Triton Insurance Company Ltd in


Calcutta The enactment of the British


Insurance Act The Indian Mercantile Insurance


Ltd was set up The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life


business. The Indian Insurance Companies


Act was enacted. Nationalization of Life Insurance Sector and Life Insurance Corporation .The LIC absorbed 154 Indian, 16 non-Indian insurers as


also 75 provident societies. The General Insurance Corporation

of India was incorporated as a company General insurance was nationalized


on 1st January 1973

Principle of insurance  Utmost good faith  Insurable interest  Principle of indemnity

   

Principle of contribution Principle of subrogation Principle of mitigation loss Principle of “cause proxima”

Principle Utmost good faith Insurance is subject to a more stringent common law principle of good faith, often called the principle of utmost good faith. It means that each party is under a duty to reveal all vital information (called material facts) to the other party, whether or not that other party asks for it. For example, a proposer of fire insurance is obliged to reveal the relevant loss record to the insurer, even where there is not a question on this on the application form. Insurable interest The word ‘interest’ can have a number of meanings. In the present context, it means a financial relationship to something or someone. There are a number of features to be considered with ‘insurable interest’, as below. Insurable interest is a person’s legally recognised relationship to the subject matter of insurance that gives them the right to effect insurance on it. Since the relationship must be a legal one, a thief in possession of stolen goods does not have the right to insure them. An insurance agreement is void without insurable interest. The rules

relating to return of premiums under such an agreement vary as between the different classes of insurance. These rules are the general rules on illegality of contract and the relevant provisions of the Insurance Companies Ordinance (‘ICO’) and of the Marine Insurance Ordinance. Principle Indemnity Indemnity means an exact financial compensation for an insured loss, no more no less. Indemnity cannot apply to all types of insurance. Some types of insurance deal with ‘losses’ that cannot be measured precisely in financial terms. Specifically, we refer to Life Insurance and Personal Accident Insurance. Both are dealing with death of or injury to human beings, and there is no way that the loss of a finger, say for instance, can be measured precisely in money terms. Thus, indemnity cannot normally apply to these classes of business. (Note:medical expenses insurance, which is often included in personal accident and travel insurance policies, is indemnity insurance unless otherwise specified in the policies.) Other insurances are subject to the principle of indemnity. Principle Contribution This is a claims-related doctrine of equity which applies as between insurers in the event of a double insurance, a situation where two or more policies have been effected by or on behalf of the insured on the

same interest or any part thereof, and the aggregate of the sums insured exceeds the indemnity legally allowed. [Example: Suppose a husband and wife each insure their home and contents, each thinking that the other will forget to do it. If a fire occurs and $200,000 damage is sustained, they will not receive $400,000 compensation. The respective insurers will share the $200,000 loss.] Apart from any policy provisions, any one insurer is bound to pay to the insured the full amount for which he would be liable had other policies not existed. After making an indemnity in this manner, the insurer is entitled to call upon other insurers similarly (but not necessarily equally) liable to the same insured to share (or to contribute to) the cost of the payment. Principle Subrogation Subrogation is the exercise, for one’s own benefit, of rights or remedies possessed by another against third parties. As a corollary (i.e. a natural consequence of an established principle) of indemnity, subrogation allows proceeds of claim against third party be passed to insurers, to the extent of their insurance payments. At common law, an insurer’s subrogation action must be conducted in the name of the insured. Suppose, for example, that a car, covered by a comprehensive motor policy, is damaged by the negligence of a building contractor. The motor insurer has to pay for the insured damage to the car. As against the negligent contractor, the insured’s right of recovery will not be affected

by the insurance claim payment. However, the motor insurer may, after indemnifying the insured, take over such right from the insured and sue the contractor for the damage in the name of the insured. From this, it will easily be seen how subrogation seeks to protect the parent principle of indemnity, by ensuring that the insured does not get paid twice for the same loss. Principle Cause proxima The proximate cause of a loss is its effective or dominant cause. Why is it important to find out which of the causes involved in an accident is the proximate cause? A loss might be the combined effect of a number of causes. For the purposes of insurance claim, one dominant cause must be singled out in each case, because not every cause of loss will be covered. In search of the proximate cause of a loss, we often have to analyse how the causes involved have interacted with one another throughout the whole process leading to the loss. The conclusion of such an analysis depends very much on the identification of the perils (i.e. the causes of the loss) and of their nature. All perils are classified into the following three kinds for the purposes of such an analysis Types of policy

Third-Party Insurance Motor third-party insurance or third-party liability cover, which is sometimes also referred to as the 'act only' cover, is a statutory requirement under the Motor Vehicles Act. It is referred to as a 'third-party' cover since the beneficiary of the policy is someone other than the two parties involved in the contract that is, the insured and the insurance company. The policy does not provide any benefit to the insured; however it covers the insured's legal liability for death/disability of third party loss or damage to third party property. How Does it Work? A third party insurance policy is a policy under which the insurance company agrees to indemnify the insured person, if he is sued or held legally liable for injuries or damage done to a third party. The insured is first party, the insurance company is the second party, and the person the insured injure or who claims damages is the third party. What do I get? Cover for causing accidental injury or death to other people Cover for accidental damage to other people's property

What is not Covered? Please remember that our third party only car insurance policy will not cover the cost of any damage to your vehicle or belongings in the event of an accident. It will also not cover you if your car or belongings are stolen or destroyed. Comprehensive policy Comprehensive and Collision coverages pay to repair or replace your auto if it is stolen or damaged in an accident, regardless of who is at fault. For each coverage, you select a deductible that you pay out of pocket. Your insurance company pays for the remaining damage up to the limits you select. With Collision coverage, your insurance company pays for damage to your auto when you collide with another vehicle or object. If you hit a car, a pole or another nonliving object, Collision coverage will apply. With Comprehensive coverage, your insurance company pays for damage to your auto caused by an event other than a collision, such as fire, theft or vandalism. If you hit an animal, or if your auto is flooded or stolen, Comprehensive coverage will apply.

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