Motor Vehicle Insurance: Taking people for a ride… Part 1

Benefits limited, Tensions unlimited

By Neeraj Mahajan

Here are a few interesting Case Studies: 

Case # 1: A vehicle owner took an insurance policy including third-party liability as per the provisions of the Motor Vehicles Act after paying the yearly premium by cheque. Soon thereafter, he met with an accident resulting in the death of a relative, whose family became eligible for compensation. But instead of paying the claim, the insurance company cancelled the policy after the date of the accident because of dishonor of the cheque. Honorable Supreme Court observed: “Where an insurance company issues third-party insurance cover to the owner of a vehicle on the basis of cheque payment, it will be liable to compensate the third-party's claim if the latter meets with an accident, even if the cheque for the premium amount is dishonored. Only if the insurance company has cancelled the policy following such dishonor and has intimated the owner before the accident, can it reject such a claim.”

Case # 2: Rishi Sinha an accountant was driving his Skoda Laura when a truck rammed his car. Rishi got out of the car and saw that there was a minor damage to the bumper. He quickly made up his mind that there was no point in going to the insurance company and it would be better to get it repaired from his own mechanic than to miss out on the no-claim bonus. This is a fact far too many people opt for a third party insurance because its mandatory and to avoid a challan but never even think of filing a minor claim because it unnecessarily triggers off a chain reaction of where a host of insurance agents, surveyors, development officers, attorneys, mechanics, workshops and others want to make as much money as possible from the incident. It’s too expensive to get small insurance claims—due to too many legal and illegal costs.

Case # 3: In a landmark judgment, expressing dissatisfaction at the procedural delays in settlement of claims and hardships to victims and their families and also the fact that in many cases full compensation awarded by the courts is not reaching the families, a three-judge bench of Supreme Court Justices: R.V. Raveendran, Mukundakam Sharma and K.S. Radhakrishnan asked the Centre to create a Road Accident Fund (RAF) through levy of cess/surcharge on petrol and diesel and credit it to such Fund. In a written order the Supreme Court directed the DGPs in all States to instruct all police stations to maintain Accident Information Reports (AIR) and submit the same to the jurisdictional Motor Vehicle Claims Tribunal within 30 days of registration of the First Information Report. “In cases of injuries to any accident victim where the liability was not disputed, the insurance company should offer treatment at its cost to the injured without waiting for an award of the Tribunal. If insurance companies can meet the bills for treatment of those who have taken a medical insurance policy, we see no reason why they should not extend a similar treatment to the accident victims of vehicles insured with them,” the Supreme Court Bench observed. 

Case # 4: A group of pilgrims from Gujarat India hired a bus to go to Badrinath, Kaidarnath. On the way the bus met with an accident near the Garhwal Himalayas. Twenty three people died and 15 others received serious injuries in the incident. Their legal representatives and dependents had to make several trips 1500 miles away from their homes, incurring further expense, to get the illusionary claim. Commenting on this the Law Commission of India observed, “The geographical barrier to access to justice is also to some extent an economic barrier. Forum at a long distance would be distinctive. It can be physically or economically impossible for the disputants to use the courts for most disputes. Cost of travel, taking witnesses, finding lodging and boarding, would add to the cost of litigation and render geographic barrier an economic barrier. Litigation by persons of modest means who have lost a bread winner or whose capacity to earn is impaired by injury would be effectively fore closed by the distant forum. Therefore the ‘haves’ have come out better in litigation strategies. It is therefore imperative to discuss the importance of accessibility of courts as one feature in improving the quality of justice industry.”

Case # 5: Coach Crashes can have a devastating impact on the lives of victims and their families. Even for those lucky enough to escape physical injury, it can still take a long time to recover from the shock. If a coach accident has occurred abroad, those injured or affected can often be left feeling that they don’t know who to turn to for support and advice. An ideal example of this kind is that of five foreign tourists – including four 19 year old British students and a 20-year-old Korean on a holiday trip to Thailand who lost their lives when the night bus in which they were travelling from Bangkok to Chang Mai was hit by an intercity bus on the highway. What remained of the crash was twisted debris and mangled bus parts on the highway. The scene was so gruesome that a member the ambulance crew captured the scene with a video camera and uploaded it on YouTube. 19 years old Bruno Melling Firth, Max Boomgaarden-Cook, and Conrad Quashie – had saved all year for a final holiday together before starting university.

Early next morning their parents got a call informing them of the fatal accident. Six months later, the mothers of the deceased are still trying to find out why and how their sons were killed. But the Thai authorities and the UK Foreign Office continued to ignore their requests for information about the crash. Irrespective of the fact that the US State Department rates Thailand as the world's second most dangerous country after Honduras in terms of road fatalities suffered by American tourists the problem is even more immense and not specific to any country. The situation – in any country anywhere in the world is heavily loaded against victims of accidents. To fight a compensation claim in a foreign country amidst strangers, with no help in hand to deal with the police, the lawyers, the witnesses as well as to gather evidence for a protracted legal battle in addition to arranging for the expenses can be a further nightmare for the dependents of the victim.  The least it deserves is a sympathetic hearing.

Case # 6: A bus carrying Indian tourists on a sightseeing trip from Washington, D.C. to Niagara Falls blew a tire and spun out of control killing two women on board. Kaizar Master the husband and Maryam Kaizar Master the 17-year-old daughter of Sakina, who died in the bus crash, filed a USD 40 million lawsuit, blaming the driver and bus company for negligence. Kaizar and his daughter Maryam Master both Indian citizens who currently live in Abu Dhabi filed the lawsuit seeking USD 20 million each in compensation. The lawsuit, filed on behalf of them before the Niagara County Court, alleged negligience on part of tyre-maker Bridgestone, Bedore Tours of North Tonawanda and Motor Coach Industries of Illinois and the bus driver. It was alleged that the driver was driving too fast and exceeded the speed limit when the bus's tyre blew up. He could not control the bus and did not know what safety measure to take to avoid the accident. The Masters also blamed the bus company for not inspecting the tyres, the tyre manufacturer as well as the bus manufacturer since the bus did not have seat belts.

Insurance Companies all over the world are just as bad. Do you think the insurance company would easily pay off the claim? I have not come across a single case where the insurance company did not put up a fight and upfront offered the money which they were liable to pay because the recipient was deserving and needy. What does it prove? Meanwhile the monetary compensation is just one small part of the story – the main issue is who pays for the severe psychological trauma which the Masters have suffered after the crash and continue to suffer on account of post-traumatic stress disorder. The Masters were a close knit family. The issue is who will now teach the young girl to live without the support and guidance of her mother? Does anyone have an answer?

(To be Continued...)

Also Read:

Motor Vehicle Insurance: Taking people for a ride…2

Benefits limited, Tensions unlimited 

Motor Vehicle Insurance: Taking people for a ride…3

Insurance Frauds: Whosefault, who pays?

Road Accidents: Third Party Insurance- the confusing scenario

Causes & cost of road accidents

Innovate or Perish -- Lessons to be learnt from Indian market

By Neeraj Mahajan

Indian consumers may recall the days when just two cars – Ambassador and Fiat used to dominate Indian roads. Both these cars manufacturers were not inclined towards innovations – hence over say 50 years, they almost reluctantly brought in newer versions of the old models. But realistically speaking, apart from a small metal plate which read, Ambassador Mark IV instead of Mark I, there was hardly any fundamental change in the basic design, looks or functionality. These cosmetic changes did not satisfy the needs or wants of the average users who were highly dissatisfied. Still this went on for quite some time. Then almost overnight the scenario changed. Suddenly the floodgates of Indian automobile industry were flung open. Many new players brought it many new products. Suddenly there was a plethora of choices for the consumer as far as colors, show-off value, style statement, utility or functionality was concerned. All of a sudden, a range of cars- were available off the shelf for different target segment and price bands -- catering to the buyer’s needs, affordability and aesthetics sense. Soon, low and high end versions as well as petrol, diesel or CNG variants of the same cars were available for the discerning buyer. This was truly the age of innovations, new ideas and new ways of doing things to satisfy, keep the customer happy and engaged. This episode is an eye-opener which teaches us three things:  

Lesson # 1: Innovation is the key to success. 

You may ignore it at your own risk and cost. Where are the Ambassador or Fiat today? From being the market leaders they have been reduced to insignificant players because of lack of innovative spirit. In whatever you do you cannot ignore the present and future trends as far as customer preference or buying decisions are concerned. This is very important.   

Lesson # 2: Customers are ready to buy provided you give them the reason to buy: 

Surprisingly, the manner, in which the Indian consumers have purchased, sold off and again purchased new cars in the last one decade or so, has disproved the traditional belief that Cars are a lifetime purchase for the Indian buyers. This is not so anymore… people are ready to buy a new car and change it every 2-3 years if there is a better car available in the market.

Lesson # 3: Need to innovate is not unique to Cars alone, even buses need to innovate: 

One of the reasons why Cars have changed so much in terms of design and utility while buses haven’t-- is because each individual car is associated with its owners pride. The way it looks, drives or attracts attention – makes a big difference to his/her comfort, style and status in the society. On the other hand, buses have been considered to be just another means of public transport, or utility vehicle. That is why – buses a majority of which are in any case state-owned haven’t seen many changes in terms of design, structure, comfort and interior-exterior get up. That is why their function and utility to pick up and drop, large number of passengers – and carry them over a distance is considered to be more important than their looks or in-transit comforts.

All this is set to change in a big way. The buses in future are going to be very different from the ones that exist today. Winds of change have already begun to sweep across the global bus and coach industry. The buses in future will be more efficient and more environmentally-friendly. The core philosophy behind them as movers of people -- would be to move more people, move them comfortably, silently – making the least possible noise and with the least possible impact on the environment. In true sense of the term, it will be the age of green, clean, smart and efficient mass transit systems.