Shyamal Banerjee/Mint
Shyamal Banerjee/Mint

Getting under the hood of motor insurance

Most claims are rejected for five reasons that are well within our control

The most frequent insurance claims in India relate to motor accidents. Over 10,000 motor insurance claims are filed every day; in larger cities there are over 1,000 claims a day. The good news, if you can think of it like that, is that a high proportion of claims get paid; over 95% for many insurers.

The bad news is that many vehicles are not insured, people hesitate to file claims because they are unsure of the process and claims are rejected primarily because of our own administrative lapses.

Many more vehicles would be insured if vehicle owners realised that, in accidents, they are exposed to an unlimited liability. The Motor Accident Claims Tribunal determines the compensation to accident victims or their kin. Awards are increasing in frequency and payments of over 50 lakh are more common. Without third party insurance—which, incidentally, is mandatory—you will need to pay this yourself. Over 1,000 third-party claims are filed every day, so this is not a risk to be ignored. Apart from third-party liability, motor insurance can also cover the cost of damage to your own vehicle. This cover, called own damage, is not mandatory but worth buying because of rising repair costs.

The claim process should not intimidate you because it is simple and efficient. Take a picture of the accident if possible. This establishes how the damage was caused. Inform the insurance company on its customer service number. Have the car towed to the nearest workshop. Use your insurer’s tow service if it has one. It’s okay if you inform the insurer when your vehicle reaches the workshop. These repair workshops take complete ownership of the claims process, from having the vehicle inspected to managing paperwork and follow-up. Increasingly, workshops offer cashless repairs where the insurer pays the workshop directly.

Most claims are rejected for five reasons that are well within our control. First, the driver does not have a valid licence. It may have expired or be for a different vehicle category or be fake. Second, a personal vehicle was used as a taxi. This issue is gaining focus across the world as car-pooling becomes commonplace. Third, the insurance and vehicle are owned by different people. This means, from an insurance perspective, the policyholder has no insurable interest in the car. It is a common issue when vehicles are resold. Sometimes the vehicle is transferred but the insurance is not, or vice versa. Fourth, owners install LPG in their cars but do not register that with the regional transport office (RTO) or the insurer. Fifth, owners are negligent. They start the engine in a water-logged car (unsafe because the engine can seize) or leave the car unattended. If these five issues are addressed, it is fairly certain that your motor claim will be paid.

A frequent complaint is that the final settled amount is less than the claim. The disagreements are most on vehicles that are badly damaged. Vehicle owner prefers to write off the vehicle as a total loss whereas the insurer will try to repair because that is cheaper. This issue has to be resolved through discussion and by depending upon the external survey reports. Another common reason for lower settlement amount is that the vehicle owner tries to get damages not caused by the accident repaired. Insurers are easily able to identify such misuse.

There are some motor insurance myths that I should dispel. In an accident there is no need to establish the other driver’s fault because each vehicle’s insurance pays for its own damage. So, don’t argue with the other driver. You’ll ruin your health and block the road for everybody. If you were at fault, then that does not mean you have to pay for the other vehicle’s repairs. Their insurance will pay for repairs. All motor insurances have standard policy wordings, which means that this is the one insurance where you don’t need to read the legalese of each contract. The insurance you buy for new cars from dealers is prohibitively expensive. You could save thousands of rupees by buying that separately.

Insurers offer extensions and add-ons that are useful, particularly for the more expensive cars. The most relevant are the zero depreciation, engine seizure, and tyre repair extensions. The zero depreciation cover effectively allows you to get the full value for damages, because no deductions are made for depreciation. Engine seizure cover is useful in areas prone to rain and waterlogging. Tyre repair is important for luxury cars where tyres cost a small fortune.

Finally, on a separate note, the insurer’s public disclosures report over 10,000 claims every day. The Ministry of Road Transport publishes a widely cited report on road accidents that reports fewer than 1,500 road accidents a day. The official data is nearly 10 times less than the accident information from insurance companies. There is a case for the government and industry to collaborate and put out one set of statistics. This will save cost and effort, and be more reliable.

Kapil Mehta, co-founder, SecureNow Insurance Broker Pvt. Ltd

Close