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In todays modern world everything has become far more advancedand therefore insurance plays a

very vital role in every field andaspect of life. It is oriented towards the growth of nation but

alsocommon man in general. Despite all the planning andpreparation one might make, no one can

accurately guarantee or predict how or when death might result.Motor Insurance is one of the

largest non-life insurance businesses inthe world. This is because it is statutorily mandated in most

parts of the world. All motor vehicles are required to be registered with theroad transport

authorities and insured for third party liability. Thereare different classifications of vehicles and risks

associated with eachare different and the tariffs are decided by the Tariff AdvisoryCommittee based

on such a classification. The basic premise is thatmotor vehicles could either cause injury or be a

subject of damageand injury, and thus require insurance.

The Motor Vehicle Act of 1939 introduced compulsory insurance totake care of those who might get

injured in an accident. Motor Insurance is more of a hedging mechanism rather than a

realinvestment avenue. It is essentially a mechanism that eliminates risksprimarily by transferring

the risk from the insured to the insurer. Thechances for a fatality or an injury to occur to the average

individualmay not be particularly high but then no one can really afford tocompletely disregard his

or her future and what it holds.Therefore, Motor Insurance is mandatory for all new vehicles be it

for commercial or personal use. Insurance companies are coming outwith comprehensive policies

for its customers.

Introduction

Motor Insurance is one of the largest non-life insurance businesses inthe world. All motor vehicles

are required to be registered with theroad transport authorities and insured for third party liability.

Thebasic premise is that motor vehicles could either cause injury or be asubject of damage and

injury and thus require insurance. The Motor Vehicle Act of 1939 introduced compulsory insurance

to take care of those who may get injured in an accident.There has been a phenomenal rise in the

motor accidents in the lat 4-5 years. Much of these are attributable to a sudden spurt in thenumber

of vehicles. There is a danger at every corner when it comesto Indian roads. Therefore, every vehicle

being driven on roads has tobe compulsorily insured.Legally, no motor vehicle is allowed to be

driven on the road withoutvalid insurance. Hence, it is obligatory to get the vehicle insured.Motor

insurance policies cover any loss or damage caused to thevehicle or its accessories due to the naturaland man made calamitieslike fire, explosion, earthquake, flood, burglary, theft, riot, strike,malicious

act etc. Motor insurance provides compulsory personalaccident for individual owners of the vehicle

while driving. One canalso opt for a personal accident cover for passengers and third partylegal

liability. The third party legal liability protects against legalliability arising due to accidental damages.

It includes any permanentinjury or death of a person and damage caused to the property.

It represents a combined coverage of the vehicles including loss or damage to his property or life

and the third party coverage.We read everyday in the newspapers about accidents, bombexplosions

taking place. 30 out of 100 vehicles meet with accidentson the road. You step out of your house and

at every momentencounter number of risks that one cannot imagine. What is worryingfor all of us isnot the operation of those risks but the operations thatare accidental, unforeseen and external.

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There is hardly any industry i.e. manufacturing activity or serviceorganization that does not come

within the scope of GeneralInsurance. Risk is inherent aspect of human life whether individual or

organization. Without risks there cannot be progress. Occurrence of uncertainty cannot be

predicted. Insurance is one certain way of dealing with uncertainties because risk arises out of

uncertainty andis a pervasive force in the world.

History of Motor Insurance

Motor Insurance had its beginnings in the United Kingdom in the earlypart of this century. The first

motor car was introduced into England in1894. The first motor policy was introduced in 1895 to

cover thirdparty liabilities. By 1899, accidental damage to the car was added tothe policy, thus

introducing, the comprehensive policy along the linesof the policy today.In 1903, the Car and

General Insurance Corporation LTD wasestablished mainly to transact motor insurance, followed by

other companies. After World War 1, there was a considerable increase inthe number of vehicles onthe road as also in the number of roadaccidents. Many injured persons in road accidents were

unable torecover damages because not all motorists were insured. This led tothe introduction of

compulsory third party insurance through thepassing of the Road Traffic Acts 1930 and 1934. The

compulsoryinsurance provisions of these acts have been consolidated by theRoad Traffic Acts

1960.In India, the Motor Vehicles Act was passed in 1939 introducing thelaw relating to compulsory

third party insurance. The practice of motor insurance in India generally follows that of the U.K.

market.The business is governed by a tariff, whereas in U.K. the tariffs havebeen withdrawn. The

Motor Vehicles Act 1988 has replaced theearlier 1939 Act, and it became effective from 1st

July

1989.