Introduction to Motor Insurance
Motor Insurance is one of the most visible and high-volume segments in general insurance.
In India, it’s not just a product — it’s a legal requirement.
If you’re preparing for your insurance exam, think of motor insurance as a mix of law + protection + opportunity.
Let’s break it down in a way that’s easy to recall.
1️⃣ Why Motor Insurance Exists
The origin in India goes back to the Motor Vehicles Act, 1939, which first made third-party insurance compulsory.
The updated Motor Vehicles Act, 1988 continues this requirement today.
Purpose:
Protect third parties (other people, their property) in case of accidents.
Cover vehicle owners against losses due to damage/theft of their own vehicle (optional but common).
Exam Note: Third-Party Insurance is mandatory; Own Damage cover is optional but often combined as a Package Policy.
2️⃣ Types of Motor Insurance Policies
1. Own Damage (OD) Cover – Protects the insured’s own vehicle against loss/damage.
2. Third-Party (TP) Liability Cover – Covers injury, death, or property damage to others.
3. Comprehensive/Package Policy – Combines OD + TP.
Exam Note: “Act Policy” usually means only TP cover as per Motor Vehicles Act.
3️⃣ Key Principles in Motor Insurance
Motor insurance is governed by general insurance principles plus legal requirements:
Utmost Good Faith – Full disclosure of facts by the proposer.
Insurable Interest – The insured must stand to lose financially if the vehicle is damaged or lost.
Indemnity – Compensation to restore the insured’s financial position without profit.
Subrogation – Insurer’s right to recover loss amount from third parties after claim payment.
Contribution – Loss shared proportionately between insurers if double insurance exists.
Proximate Cause – Loss must be directly caused by an insured peril.
4️⃣ Legal Requirements Under MV Act, 1988
Compulsory TP cover before using a vehicle in public.
Certificate of Insurance (Form 51) must be issued.
Transfer of policy on sale of vehicle → TP section automatically transfers; OD section needs insurer consent within 14 days.
Permits & Fitness Certificates are essential for transport vehicles.
Exam Tip: Remember Section 146 (Compulsory Insurance) & Section 157 (Transfer of Insurance)
5️⃣ Industry Snapshot
Loss ratio for motor insurance in 2021–22: 81.3% (IRDAI data).
TP premium rates fixed by IRDAI; OD rates are market-driven (since 2008 detariffing).
Growth drivers: electric vehicles, online distribution, vehicle scrappage policy.
🎯 Memory Hooks for Exam
“TP is Law, OD is Choice” – Remember which is compulsory.
“IDV is Agreed, not Market Price” – IDV is fixed at policy start.
“14 Days for OD Transfer” – After vehicle sale.
“MV Act 146 & 157” – Compulsory insurance & transfer rules.