Medios y técnicas de comunicación

Q. Discuss the primary factors in underwriting motor business.

Ans. On the one hand where Motor business forms major part of insurers insurance business, on the other hand it is unprofitable also. In view of this it is necessary to adopt a sound underwriting policy in motor business. The primary factors in underwriting motor business may be grouped under the following headings:

(i) The vehicle

(ii) The use of the vehicle

(iii) The geographical area of operation (iv) The Proposer of the vehicle and (v) The claims experience.

(i) The Vehicle - The underwriting approach depends on the type of vehicle. In this regard following are the considerations:

a) The year of manufacture -The age of the vehicle is important from the underwriting point of view. As a vehicle becomes older, defects appear more frequently and metal fatigue sets in. Old vehicles are normally inspected before underwriting and subject to their condition, they are accepted for insurance with or without excess and/or for restricted cover.

b) The purchase price or the insured's estimated value - Since there is no pro rata condition of average in motor policy, careful attention has to be paid to the insured's estimated value in relation to age of the vehicle. This is essential to avoid dispute in the event of Total Loss.

c) Imported cars -Greater care is to be exercised in underwriting imported cars and sports cars.

(ii) Use of the vehicle – Following are the considerations:

a) The purpose for which the vehicle is used – This has link with exposure of risk. This aspect is taken care of in the rating system adopted by the tariff. Private cars poses a lighter risk than taxis which are subject to much greater utilisation.

Similarly private carriers are better risks than public carriers as the latter are exposed to a greater incidence of accidents and wear and tear.

b) Goods carried in case of goods carrying vehicles - The general nature of the goods carried in respect of a goods vehicle is also an important aspect for underwriting purposes, especially if they are flammable or likely to explode.

(iii) Area of operation- The exposure to risk depends upon the area in which the vehicle is used. This is a physical hazard.

In the rating system for private cars the tariff and has taken care of this aspect wherein the rates differ according to the zones in which the car is used. (Zone A and Zone B)

(iv) Proposer of the vehicle – These consideration are to take care of Moral Hazard. In comparison to physical hazards like the physical condition of the vehicle or the use to which it is put or the area in which it is used the proposer/owner of the motor vehicle is more responsible for bad claims experience.

While considering the acceptance of new proposals, it may not be easy to ascertain all aspects of moral hazards. But the owner's behaviour and attitude during the currency of the policy and when a claim arises will be indicative of the moral hazard. This aspect will have to be borne in mind at the time of renewal.

(v) The Claims Experience – The claims experience for last three to five years gives a good clue regarding the proposal.

Hence the information regarding the claims experience of the proposer is asked in the proposal form separately for 'own damage' claims and third party claims. A single or a series of major claims need not be a matter of concern but a series of minor accidents over a period of time is definitely an unsatisfactory experience. Such proposals should be accepted with great care and preferably an excess should be imposed.

(88)

Q. The Driver of the Vehicle is an important underwriting consideration in Motor Insurance. Discuss.

Ans. This consideration is to take care of Moral or Personal Hazard. In comparison to physical hazards like the physical condition of the vehicle or the use to which it is put or the area in which it is used the driver of the motor vehicle is more responsible for bad claims experience. The physical hazards are taken care of in the rating system but the personal hazard of the driver can not be taken care of in the rating system. It is essentially the driver who is responsible for good or bad claims experience in motor insurance. By careful driving and by taking a pride in his vehicle, an insured can substantially reduce loss possibilities. On the other hand, neglect and carelessness are two factors which are responsible for bad claims experience.

The hazard arising from the driver can be assessed from the point of view of' his age, physical condition, driving experience and occupation. Age has a material bearing on the risk. The young driver presents an unfavorable hazard because speed has a special attraction for youth. Similarly, an elderly driver involves an increased physical hazard. Because of advancing age his faculties are less keen resulting in lower reactions which may have serious consequences in the event of an emergency. Physical defects regarding vision, hearing or loss of limbs add to the exposure of risk. Common defects of vision which can be corrected by glasses or contact tens are ignored. The loss of sight in one eye is much more serious as it impairs the field of vision and judgement of distances.

Deafness which can be overcome by the use of hearing aids is ignored by the underwriter. Loss of limbs introduces considerable hazards.

The driving experience may indicate accident-proneness.

Many accidents occur with new drivers because of their limited driving experience where as the experienced driver who is reckless take risks in over confidence.

The proposal form can not indicate the temperament of

an individual or his driving habits. This can be ascertained from the claims experience and history of conviction for traffic offences. Minor conviction for speeding or parking may be ignored but a number of such convictions may indicate both recklessness and indifference to the law on the part of the proposer. in such cases, comprehensive cover may not be granted.

The risk is closely associated with the occupation of the proposer. Person engaged in the entertainment professions represent a hazardous class of risk as they use their cars for long and hurried journeys.

While considering the acceptance of new proposals, it may not be easy to ascertain all the above aspects of moral hazards. But the owner's behaviour and attitude during the currency of the policy and when a claim arises may be good indication which can be borne in mind at the time of renewal.

Q. Discuss the problems of motor insurance underwriting of the following :

(a) Older vehicles (b) Imported cars.

(c) Cars imported by foreign embassies (d) Sports Cars.

Ans. (a) Older vehicles – The age of the vehicle is important from the underwriting point of view. Older vehicles are not generally maintained properly. As a vehicle becomes older, defects appear more frequently and metal fatigue sets in. The claims experience of insurers in respect of older vehicles is not satisfactory.

Since T.P. Insurance is compulsory under Motor Vehicles Act, the insurers can not totally avoid covering the older vehicles. Hence they may offer restricted cover or imposition of excess. But the proposers (owners) are not satisfied with the offer of the insurers for restricted cover. Hence, another problem faced by the insurers is to convince the proposer. Still while granting cover for older vehicles insurers prefer to pre- insurance inspection and acceptance of insurance with

(90)

excess and restricted cover. Even after granting cover for older vehicles, good underwriting practice on the part of the insurers requires strict watch on the claims experience so as to decide the acceptance of such older vehicles for renewal of cover. The underwriting guidelines adopted in regard to the insurance of old vehicles differ from insurer to insurer.

Another problem is in regard to the acceptance of the insured's estimated value declared by the proposer. Since there is no pro rata condition of average in motor policy, careful attention has to be paid to the insured's estimated value in relation to age of the vehicle. This is also essential to avoid dispute in the event of Total Loss.

(b) Imported cars - Motor insurance underwriting of the imported cars poses several problems to insurers. Imported cars present problems to insurers both at the time of acceptance of business and also at he time of loss

There is the problem of obtaining spare parts. The cost of repairs of an imported car is also high because of the cost of the materials and intricate design which requires more time spent on dismantling or assembling. Valuation of imported cars at the time of insurance would also pose a problem.

The policy covering such cars is invariably subject to the Endorsement to the effect that in the event of loss or damage necessitating the supply of a part not obtainable from stocks held in the country in which the Motor Vehicle is held for repair, the Company shall pay in cash the amount of the loss or damage in respect of any such part plus the reasonable cost of fitting. However the liability of the Company for the cost of such part in the country in which the Motor Vehicle is held for repair, shall be limited to

i) the price quoted in the latest price list issued by the Manufacturer or his Agents for the country, or

ii)if no such price list exists, the price last obtaining at the Manufacturer's Works plus the reasonable cost of transport (otherwise than by air) to the country and the amount of the relative import duty. .

Such cars not older than 10 years are accepted on comprehensive terms subject to an 'excess'. Some insurers exclude damage to the windscreen. Imported cars over 10 years and less than 15 years old are accepted on comprehensive terms with a higher excess. Such cars over 15 years old are accepted for Third Party risks only.

(c) Cars imported by foreign embassies – Motor Insurance of Cars imported by foreign embassies pose a special problem.

The embassies are exempted from paying customs duty on the imported cars and at much less price than market price. To obviate the difficulties like under-insurance in case of insurance of such cars, the Tariff provides loading the O.D.

premium on such cars by 15%.

(d) Sports Cars - Insurance of Sports cars poses following problems:

i) Sports cars are considered to be heavier risks than other cars of the normal type.

ii) The repair costs are likely to be higher.

iii) These cars which are specially designed for high speed are usually driven by young drivers from affluent families.

iv) The loss severity will be high because of the high speed.

Proposal for insurance of these cars is to be considered on the individual merits. The acceptance is subject to an excess, exclusion of personal accident benefits and loading of premium.

Q. What are the model guidelines regarding age considerations for fresh acceptance and renewals of proposals requiring comprehensive cover on following vehicles:

a) Taxis

b) Goods Carrying Vehicles.

Ans. a) Taxis -Following are the model guidelines regarding age considerations for fresh acceptance of proposals requiring comprehensive cover on Taxis:

i) Upto 3 years – Comprehensive cover may be granted

(92) without much considerations .

ii) Upto 5 years - Subject to inspection and satisfactory claims experience.

iii) Over 5 years but upto 7 years - Subject to inspection with a further compulsory excess of Rs. 5000.

iv) Over 7 years - Act only cover should be granted.

Upto 10 years old vehicles renewal may be done on normal terms subject to satisfactory claims experience. Over 10 years renewals should be offered for Act only.

b) Commercial Vehicles - Following are the model guidelines regarding age considerations for fresh acceptance of proposals requiring comprehensive cover on Commercial Vehicles:

1) Goods Carrying Vehicles (Own Goods)

i) Upto 5 years - Comprehensive cover may be granted without much considerations .

ii) Over 5 to 7 years - Subject to inspection and satisfactory claims experience.

iii)Over 7 years and upto 10 years - Subject to satisfactory inspection and a compulsory excess of Rs. 2,500/ -;

iv) Over 10 years - Act only cover should be granted.

v)Disposal vehicles - On inspection and subject to further compulsory excess of Rs. 500/-

Upto a period of 12 years Renewal to be offered with normal terms subject to satisfactory claims experience. Over 12 years Act only cover should be granted on renewal.

2) Public Carriers

i) Upto 5 years - Comprehensive cover may be granted without much considerations .

ii) Over 5 years and upto 6 years - Subject to inspection and satisfactory claims experience or additional compulsory excess

iii)Over 7 years Act only cover should be granted.

Upto a period of 10 years Renewal to be offered with normal terms subject to satisfactory claims experience. Over 10 years Act only cover should be granted on renewal.

What are the constituents of statistical structure for motor insurance?

Ans. Rates of premium for any class of insurance are based on past loss experience. So is the case with Motor Insurance. In view of this it is most essential to maintain a detailed statistical structure for premium and claims cost for Motor insurance. Following are the constituents of statistical structure for motor insurance-

1)Collection of Statistics- The tariff provides classification and sub-classifications of vehicles. Statistics of premium and claims are also be maintained and collated on the same basis.

The second aspect is the nature of the cover provided as different rates are provided for Own Damage, and Act only covers. This aspect is also to be incorporated in the statistical structure.

2) Correctness of Statistics – Like any statistics the value and use of motor insurance statistics depends upon the correctness of the figures and the speed with which they can be produced.

3)Interpretation of statistics - Interpretation of statistics is as important as collation. The claims cost reflects not only the paid claims but outstanding claims. Therefore, it is essential that an effective system is adopted for proper estimates of outstanding claims be devised. The result of past loss experience have to be interpreted in the light of changing conditions surrounding motor insurance business.

4) Action on statistics - Once the claims cost is known, it is possible to develop incurred claims to premium ratio over a reasonably long period in each classification to consider effecting appropriate underwriting measures by the Companies and rate revisions by the Tariffs Advisory Committee.

Q. What are the primary factors responsible for Road accidents?

Ans. –Following are the four primary factors responsible for Road accidents :

(94)

1)The driver – The largest number of accidents is attributable to driver’s fault. This is ‘Human Cause’ of accidents.

Drunken driving, over-speeding and other violations of traffic law etc, are responsible for road accidents.

2)The vehicle – This constitutes 'Physical Cause' for road accidents

and can be summarised as bad maintenance. overloading etc.

3)The road – This is 'Environmental Cause' and consists of bad road conditions, inadequate lighting, insufficient traffic signs and signals etc.

4) The pedestrian – Reckless or indifferent behavior and disregarding road traffic rules by pedestrian cause accidents.

Q. Discuss the Role of Insurers in promoting Road Safety Ans. Although the Insurers have no direct way to play any role in road safety, indirectly they play significant role in promoting road safety and preventing road accidents. The following activities of General Insurance Industry throw light on this role:

1) The premium rating structure encourages loss prevention on the part of the motoring public as substantial discounts in the premium are offered if the insured establishes an accident free record. Again, premium discounts are offered if the insured is willing to bear a certain portion of the loss himself. These incentives not only result in reduced cost of insurance but also encourage careful driving.

2) Underwriting system followed by insurers involves careful 'risks selection' and 'risk improvement'. This makes indirect contribution to road accidents prevention.

3) The Loss Prevention Association of India established by the General Insurance Industry is actively engaged, amongst its other activities, in promoting prevention of road accidents.

The Association's involvement in road-safety programmes has the objective to reduce and contain the rapidly accelerating rate. The intensive programmes of the Association are aimed at creating awareness of road safety measures and traffic

rules for pedestrians and include driver education programmes with special emphasis on defensive driving techniques and specially designed programmes for child-safety on the roads.

Q. What are the remedial actions for the reduction of road accidents?

Ans. Following remedial actions can be suggested for reduction of road accidents:

1) The elimination or minimisation of driver error – For this purpose driver education assumes crucial importance. The training imparted by the motor training schools must be intensive and adequate to provide the skills needed in complex traffic situations. The training should aim at developing in the driver a strong sense of personal and social responsibility for safe operation of motor vehicies. It is also essential that testing standards of Road Transport Authorities must be of a stringent order.

2) Improving pedestrian behaviour - Reckless or indifferent behavior and disregarding road traffic rules by pedestrian cause accidents. To ensure Road Safety behaviour of pedestrian is to be improved. This is a long term process. It is essentially a matter of self discipline. Safety consciousness and civic sense will have to be fostered right from the elementary school level. Secondly, enforcement of traffic laws by the police and the law courts, will bring about more responsible pedestrian behaviour.

3) Elimination of Physical Cause - Defective vehicle which is the physical cause, ranks second among the causes contributing to road accidents. The question has following dimensions

i) Regular maintenance of the vehicle by the owner on a voluntary basis,

ii) Compulsory maintenance through strict enforcement of rules regarding periodical inspection of vehicles by Road Transport Authorities

iii) Tachograph to provide irrefutable evidence in case of

(96)

accidents by giving relevant information about the speed, time and place of accident. It promotes good driving habits and this results in saving of fuel and maintenance costs and reduction of road accidents.

iv) Post accident repair inspection of the vehicle by both the Insurance Surveyors and the road transport authorities in case of major damage.

4) Road safety – Transport Development Council of the ministry of shipping and Transport has made following recommendations having a bearing on road safety:

a) strengthening or creating facilities for highway testing, control and research for consideration of State Governments in whom is vested the bulk of road construction. For example, a model scheme for organising State testing and control laboratories prepared by the Central Road Research Institute has been circulated to the States for their implementation.

b) Planning, design and construction of road facilities.

c) Adequate, proper and systematic maintenance of the National Highways and other roads in the country, through

c) Adequate, proper and systematic maintenance of the National Highways and other roads in the country, through