MV Act, IMT - recent circular of IRDA - IMT 29 - some thoughts !!

Insurers, Insurance Agents, Insurance Brokers,  Insuring public and other road users – must be aware of a recent circular issued by IRDA on recently on 18.10.2023 (available on their website) – here are some insights !! on Motor Insurance for understanding that circular.

 

As we travel on roads,  we jostle in traffic - we see hundreds of motor vehicles of various hues – and sadly there are accidents too .. .. .. Motor vehicle accidents are one of the major causes of death and injuries in India.   Motor Vehicles Act 1988 covenants various aspects of automobiles on road. .. ..   

The Act,  inter-alia, makes  vehicle insurance mandatory.  Sec 146. (1) No person shall use, except as a passenger, or cause or allow any other person to use, a motor vehicle in a public place, unless there is in force, in relation to the use of the vehicle by that person or that other person, as the case may be, a policy of insurance complying with the requirements of this Chapter.. .. ..   and there is Motor vehicle insurance.  

In olden days, life of Motor Insurer was spent more on reading and interpreting the provisions of “AIMT” -  wonder what ? – All India Motor Tariff, the ultimate smrithi handed by Tariff Advisory Committee laying down rules, regulations, rates, terms and conditions in accordance with the provisions of part IIB of Insurance Act 1938.  The AIMT was revised from time to time – remember the big black book, it undergoing revisions in 1989 and present one coming into vogue since  30^th June 2002. (likely that you had not joined Insurance industry by these dates !)  

The succinct line is : the provisions of the AIMT is binding on all concerned and any breach of Tariff is a breach of the provisions of the Insurance Act 1938. 

The Tariff was elaborately codified with Sections of :  1) General Regulations (GR);  2 Private Car 3) Motorised two-wheelers 3) Commercial vehicles – sub divided as Goods carrying, Trailers, Passenger carrying, Misc and Spl type, Motor Trade – road transit, road risks and internal risks;  IMT endorsements, proposal forms; Standard wordings, Statistical codes   

Sec 7 of AIMT deals with Endorsements.  The present circular of IRDA directly impacts this section, in specific IMT 29 that is about coverage for employees travelling in a private car.  

To provide you a gist of its contents : 

·        Clause 7 of Sec 2 of Tariff (reference is to Private car) provides for coverage of employees travelling in a Car owned by their Employer – being involved in an accident and the liability to the victims ie., employees in that road accident or usage of that vehicle in public place.

·        Presently, Tariff provides for such coverage  (for employees travelling or driving) at an additional premium of Rs.50 per employee

·        Such additional premium is to be calculated and charged on the max licensed seating capacity of the vehicle.

·        The present circular is a fall out of Judgment of Madras High Court  in CMA No. 2166 of 2019 & CMP No. 8871 of 2019 (United India Insurance Co. Ltd., Vs Ilakkiyamathi & others)

·        The Hon’ble Court  observed that in cases of employees travelling in the private vehicles of the employers, met with an accident and got injured or faced untimely death, it becomes a nightmare for the claimants to recover compensation from the employer. This leads to claimants to suffer endlessly having lost their sole breadwinner or having suffered injuries.

·        While the coverage is already available and Insurers liable (only when) such cover is taken and premium paid, the Hon’ble Court directed the Authority, in exercise of the powers conferred by Section 14(2) of Insurance Act 1938, that :  all General Insurers carrying on Motor Insurance should provide the cover to the employees travelling in employer’s vehicle (including paid driver if applicable) under IMT-29 of the Indian Motor Tariff, compulsorily as an inbuilt coverage while issuing private car policy for such vehicles.

·        Following this such coverage becomes available as in-built cover without any specific action on the act of proposer and is now available free-of any premium in all policies be it Package/Bundled, standalone TP ..

·        This circular directs that ‘no additional premium’ in respect of this cover be charged until further directions.   

That makes the circular and coverage abundantly clear – yet some additional info.  Sec 2 of AIMT deals with Private Car.  The scope under this is  Private Car Type Vehicles  used for social, domestic and pleasure purposes and also for  professional purposes (excluding the carriage of  goods other than samples) of the insured or used by the insured's employees for such purposes but excluding use  for hire or reward, racing,  pace making, reliability trial, speed testing and use for any purpose in connection with  the Motor Trade. 

Sec 7. : EXTRA BENEFITS  

Premium for each of the following extra benefit opted for by the insureds is to be shown separately in the premium computation table:  

(i) Legal liability to paid drivers /and/or cleaner employed  in connection with the operation and/or maintenance of motor vehicle under the Workmen’s Compensation Act, Fatal Accidents Act and at Common Law  

(ii) Legal Liability to employees of the insured traveling in and / or driving the employer's vehicle.  

Liability to employees of the insured traveling in or driving the employer's vehicle, either excluding or  including the paid driver may be covered  on payment of Additional Premium @  Rs. 50 /- per employee, the premium being chargeable on the total number of such employees carried (including the paid driver, if applicable)  but  not exceeding the maximum licensed seating capacity of the vehicle. The Additional Premium of  Rs.50/- per employee is net irrespective of any period of insurance not exceeding 12 months.  

Endorsement IMT-28 (for paid driver and/or cleaner) or IMT-29 (employees other than paid driver and/or cleaner)  as applicable  is to be  used.  

Concluding with the Tariff wording for the endorsement IMT 29 also.   LEGAL  LIABILITY  TO  EMPLOYEES  OF  THE  INSURED  OTHER  THAN  PAID  DRIVER AND/OR  CONDUCTOR  AND/OR CLEANER  WHO  MAY  BE  TRAVELLING  OR  DRIVING IN  THE  EMPLOYER’S  CAR. {Private Cars only/ Motorised two wheelers (not for hire or reward)}  

In consideration of the payment of an additional premium @ Rs.__/- per employee insured notwithstanding anything to the contrary contained in the policy it is hereby understood and agreed that the insurer will indemnify the insured against the insured’s liability at Common Law and Statutory Liability under the Fatal Accidents Act, 1855 for compensation (including legal costs of any claimant)  for  death of or bodily injury to any employee  (other than paid drivers) of the within named insured being carried in or upon or entering in or getting on to or alighting from or driving the vehicle insured.         

Provided that in the event of an accident whilst the vehicle insured is carrying more than .....* employees of the insured (including the driver) the insured shall repay to the insurer a rateable  proportion of the total amount  payable  by  the insurer by the reason of this endorsement in respect of  accident in connection with such vehicle insured. 

Subject otherwise to the terms, conditions limitations and exceptions of this Policy. 

So in comes IMT 29 compulsorily made available without payment of any premium –  additional liability which MV Act provisions did not mandate.  What will be the view of Insurers ?

 
With regards – S Sampathkumar
19/10/2023