Proposal

The person desirous of taking a motor insurance has to approach an insurance

company asking for a proposal form for the particular type of vehicle which he

wants to insure. For private cars, commercial vehicles and motor cycles different

proposal forms are used. The specimen proposal forms for the insurance of the first

two vehicles are given at the end of this article. Proposal form for insurance of

motor cycles is similar to that for private cars. The proposer must carefully answer

all the questions which are mentioned in the proposal form. It will be on the basis

of his answers that the risk will be assessed and the premium will be fixed. Non-

disclosure about any material fact will entitle the company to repudiate the

liability.

The questions in the different proposal forms differ because they relate to the

different vehicles. The first part of the questions relates to the identification of the

vehicle such as the registered letters and number, make, horse power, type of body,

year of manufacture, seating or carrying capacity as the case may be, present

estimated value, etc. The second part of the proposal form deals with questions the

answers to which will determine the risk so that an appropriate premium may be

fixed. These questions are with regard to the use to which the vehicle is put, its

equipment, past insurance, type of policy desired and risks to be covered, etc.

At the end of the proposal form there is the declaration about the truth and

completeness of the statements made in the proposal form by the proposer and this

declaration is made the basis of contract between the assured and the insurance

company subject to the conditions prescribed in the policy.

Rating

When the proposal form is received by the company it will fix the premium rate. If

the company is a tariff office, it will consult the rating book issued by the Tariff

Association, which contains schedules of rates for different vehicles for different

policies. Each member company charges the rates according to the schedule for the

particular vehicle under a particular policy. The company will first find out the

basic premium from the schedule and then add to it the amounts for additional risks or subtract from it the rebates allowed for excluding certain risks. The final

amount will be the premium charged from the insured.

In case of Act and Third Party Policies, it is the horsepower which determines the

premium for private cars and motor cycles, and for the comprehensive policies

horsepower and the value of the vehicle are the principal factors for fixing the

premium.

If the owner or a named person is to drive the car, a rebate of the premium is

allowed because of lower mileage. A rebate is also allowed if the insured agrees to

bear a particular first portion of each claim for damage to the insured car. Similarly

if one owner possesses more than one car and all of them are insured the company

will allow a rebate. Further, if the insured is the member of any recognized

Automobile Association, a rebate of 10 p. c. is allowed.

In rating the Commercial Vehicles, the procedure is a little complicated one. It will

depend on the type of vehicle, its carrying capacity, vehicle hauling trailor or not,

value, risks covered, etc. Different rates are charged for town and mofussil areas.

The rebates are allowed in case of commercial vehicles and motor cycles on the

same grounds as those mentioned in case of private cars.

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