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Good-carrying vehicle insurance applies motor insurance to commercial vehicles designated to carry goods. Commercial vehicles are those driven for business purposes, including passenger-carrying or goods-carrying vehicles. Vehicles that are driven for pleasure come under private carriers. If a vehicle is meant to be used for any commercial purpose, it should be registered under a commercial nameplate, and an appropriate insurance policy should be taken. Commercial vehicles like cabs, tippers, pickups, tractors, etc., require distinct commercial vehicle insurance. Commercial vehicles are charged higher when compared to private vehicles because commercial vehicles have higher claim ratios. This could be attributed to the higher usage of commercial vehicles as it increases the chance of occurrence of an accident and thereby increases the claim ratio. More than 70% of the commercial vehicles on the road are goods-carrying vehicles, whereas the remaining 30% include passenger-carrying vehicles. Having the best commercial goods carrying vehicle insurance policy is very much required to receive the claim without hiccups at the time of the accident. The validity of commercial goods carrying vehicle insurance is 12 months from the policy's inception, after which it has to be renewed again for another 12 months.
Commercial vehicles have the highest third-party claim losses compared to other vehicles, which could be attributed to third-party bodily injury claims where the claim amount could not be forecasted in advance. Most liability losses in India occur due to the highest number of commercial vehicle accidents. Since commercial vehicles are heavy compared to private cars, the intensity of accidents could be higher, leading to a higher number of claims. Some commercial goods-carrying vehicles, such as Tippers and trucks, have the highest third-party claim ratio, and many insurance companies would not be willing to insure them. Only a few private insurance players in the market are willing to underwrite the commercial goods vehicle insurance proposals due to the high TP losses in that segment. Commercial vehicle insurance policies are issued by all government insurance companies in India without rejection in most cases, but not by the private players. In most cases, insured customers would take only third-party insurance as it is costly and the minimum requirement to play in public places.
This section covers bodily injury or property damage to third parties involving the insured vehicle. The first party is the insured customer, the second is the insurer, and the third is any other party involved in the claim settlement process. The insurance companies handle third-party property damage claims, whereas the honourable courts award the bodily injury claims. In case of third-party property damage, the insurance company would settle the claim up to the sum insured limit mentioned in the policy. Still, in the case of a third-party death claim, the insurance company doesn't have the authority to decide on the claim quantum. The honourable courts would decide all the third-party death claims. Third-party death claims are arrived at by the honourable courts after considering many factors, such as the deceased's age, income earning capacity and the dependents of the deceased. Liability insurance is mandatory for every commercial good-carrying vehicle in public places in India as per the Motor vehicles act. Failure to adhere to these conditions could lead to penalty, imprisonment, or both for the insured customers. Commercial goods carrying a vehicle's third-party premium are decided by India's Insurance Regulatory and Development Authority and the Government of India based on the previous year's claim ratio and customers' income-paying capacity. All the insurance companies in India have to follow the Third-party premium set by IRDAI and are not allowed to deviate from it. IRDAI decides the third-party premium based on many factors, such as the previous year's GWP, the previous year's loss ratio, etc. Third-party premium may be subject to revision every year and the IRDA and Government of India would take this decision.
Third-party cover depends on the gross vehicle weight, which starts from 7500 kgs and exceeds 40,000 kgs. In contrast, in private cars and two-wheelers, the vehicle's cubic capacity decides the premium. Most goods carrying trucks, tippers, etc., would have a gross vehicle weight of more than 40,000 kg. Therefore, the premium is higher for them. Goods-carrying vehicles are classified as 3-wheelers and other than 3-wheelers and public or private. Public goods-carrying vehicles are those which are used for commercial purposes, whereas private goods-carrying vehicles are those which are used for private purposes. For example, if you purchase a goods-carrying vehicle and intend to use it for your business, it comes under a private carrier. In contrast, if you intend to use it to carry the goods of others for hire, then it comes under a public carrier.
| Goods Carrying vehicles (other than 3 wheelers) - Public | |
|---|---|
| Gross Vehicle Weight (GVW) | Premium |
| GVW not exceeding 7500 kgs | Rs. 16,049 |
| Exceeding 7500 kgs but not exceeding 12000 kgs | Rs. 27,186 |
| Exceeding 12000 kgs but not exceeding 12000 kgs | Rs. 35,313 |
| Exceeding 20000 kgs but not exceeding 40000 kgs | Rs.43,950 |
| Exceeding 40000 kgs | Rs. 44,242 |
Comprehensive commercial goods vehicle insurance cover includes third-party and own damage cover. Own damage cover compensates the insured customer for losses arising out of an insured peril causing damage to the insured property, i.e. goods carrying vehicle. All the perils mentioned above would be covered under the own damage section of the policy. In case of an own damage claim, the maximum liability of the insurance company would be the insured declared value mentioned in the policy document. Own damage cover is not mandatory for goods-carrying vehicles as per the Motor vehicles act. 1938. The act only mandates a valid third-party cover for goods carrying vehicles plying in public places.
Unlike the third-party cover, the insurance company can decide the premium in its damage section within the set limits. For example, if the limit for own damage in goods carrying vehicles is set at 1-2% of the IDV by the Insurance Regulatory and Development Authority of India (IRDAI), insurance companies can set their rates between 1-2% only and are not permitted to go above these rates. Insurance companies would decide the rate based on various factors such as loss ratio, administrative costs, number of vehicles insured etc. Comprehensive cover also includes the riders or add-ons, which can be purchased on payment of additional premiums. Add-ons such as Nil depreciation, consumables cover, roadside assistance, and invoice cover can be purchased along with their damage cover.
Commercial vehicles have IMT sections that discuss the coverage under the policy. IMT-21 excludes the losses arising from damages to the lamps, tyres, bumper, bonnet and sides, and these exclusions can be covered with IMT-23 on payment of an additional premium. There is a reason behind including the IMT-21 clause in commercial goods carrying vehicle insurance policies. Commercial vehicles are subjected to heavy wear and tear due to their continuous usage, and as the usage increases, the chance of occurrence of claims increases. The most infected parts due to accidents would be the bonnet, tyres, lamps etc., due to the wear and tear of the vehicle. All these parts would result in small claims, which would increase the insurance company's claim ratio, damage the insured's no-claim bonus and are therefore excluded from the coverage. Bumper-to-bumper add-on, as known in the market, is the most common add-on in commercial vehicle insurance.
Make & model of the commercial goods carrying vehicles decides the premium the customer has to pay. The make and model do not directly decide the premium to be paid, but the claim ratio of that particular make and model influences the premium payable. This, in turn, is insurance company specific as the claim ratio varies from one insurance company to another.
Insured declared value is the sum insured under the commercial goods carrying vehicle policy, varying from one make or model to another. The higher the insured declared value, the higher the premium for commercial goods carrying vehicles. The age of the vehicle decides the IDV in a commercial vehicle. In the first year, IDV would be 95% of the invoice price of the commercial vehicle and, later, reduced by 10% every year. For every commercial vehicle's make and model, the maximum and minimum IDV would be mentioned in the policy, and the customer can select any IDV value in the mentioned range. IDV is the maximum liability in case of a claim during the policy period of the insurance company.
The gross vehicle weight of the commercial vehicle also decides the premium to be paid by the customer. GVW is the same as cubic capacity in cars and two-wheelers. GVW is mainly taken into consideration at the time of third-party premium calculation. The higher the GVW, the higher premium insurance company charges. Gross vehicle weight is the weight of the vehicle, including the weight of commuters, fuel, and other fittings.
As per IMT-21, the insurer would not be liable under Section I of the Policy for loss to lights, tyres, hoses, fenders, side bonnet panels, bumpers or paintwork. IMT 23 endorsement overrides IMT-21 and mudguards, covers lamps, tyres, bonnet, and sides, thereby covering the parts mentioned above in case of damage due to an accident. Commercial goods carrying vehicle premium is decided based on the inclusion of IMT-23 as the inclusion increases the premium. Including IMT-23 would benefit the insured at the time of claim settlement, as most of the parts that are otherwise not covered would be covered with this section. The main intention of excluding the coverage for lights, tyres etc, under IMT-21, is that commercial vehicles are subject to harsh conditions as they would travel frequently, increasing the chance of damage to the parts and parts mentioned in IMT-21 are heavily prone to damages.
The place of registration of the commercial vehicle also plays an important role in deciding the premium. This is because all RTOs do not have the same claims ratio. There are some RTOs where the claim settlement ratio is high, impacting the company on a macro level. For example, most of the RTOs in Haryana have high claims reported and some insurers decline the proposals from such RTOs. A higher claim settlement ratio would be the premium for such RTOs. This depends on the insurance company, as every insurance company would have a different claim settlement ratio for every make and model. Few insurance companies even blacklist some RTOs which have high claims reported.
The most important factor that decides the premium is the claim settlement ratio for a particular make and model for a specific insurance company. For example, the claim settlement ratio for TATA goods-carrying vehicles could be 90% in Company A and 150% in Company B. There is no guarantee that the claim settlement ratio would be the same across the insurance companies for the same make and model. For this reason, some insurance companies offer high discounts on particular models, whereas others load the premium on the same model. The insurance companies consider the latest claim ratio and decide whether or not to insure a particular make and model of a commercial vehicle.
The registration year of the vehicle plays an important role in deciding the premium. Registration year gives information about the age of the vehicle, as age is an essential factor when determining the premium. An increase in age would decrease the premium as the vehicle's value would decrease over time. So, older vehicles would cost less in premiums compared to new vehicles. The registration year is usually calculated, whereas some companies consider the manufacturing year as well. Considering the manufacturing year could be uncomfortable for some customers as the vehicle could be manufactured in one year and registered in another year. For example, suppose a vehicle is manufactured in March 2022 but is registered in May 2023. In that case, it increases the age of the vehicle by 1 year if the manufacturing date is considered and decreases the age by 1 year if the registration date is considered.
The other important factor that decides the premium in commercial goods-carrying vehicles is the NCB available in the policy. Claim bonus NCB is not offered to customers who do not report any claim in the immediately previous policy period. NCB starts at 0%, goes up to 50%, and increases for each claim-free year. Higher the no-claim bonus, the higher the discount on the premium. High NCB leads to lower premiums to be paid by the insured. It is to be noted that the no-claim bonus discount is applied only to the own damage section of the policy and not to the third-party section.
Coverage
The coverage for commercial goods carrying vehicles is the insured declared value, also known as the sum insured. Insured declared value is mutually agreed between the insured customer and the insurance company. IDV is the insurance company's maximum liability in case of an event during the policy period. IDV for each model varies within a certain limit, and the insured can select the IDV that falls within this limit. Higher IDV leads to a higher premium for the customers. Hence, insured customers should decide on the IDV judiciously and choose the maximum IDV by going for the insurance company that provides the highest IDV for a particular model. IDV plays an important role at the time of claim settlement, particularly in total or constructive total loss situations.
As the name suggests, the insured declared value is the value of the vehicle the insured customer declares for which the insurance company agrees to provide the coverage. Insured declared value is the sum insured in a commercial goods vehicle and varies with the vehicle's make, model and age. As a rule of thumb, the IDV decreases by 10% every year due to the wear and tear of the insured vehicle. It is important to check for the highest IDV available and go for it. For this, it is advisable to consult an insurance broker so that they would provide insurance quotes from multiple insurers.
Claim settlement ratio
The claim settlement ratio for an insurance company can be defined as the number of claims settled to the number of claims reported in a financial year. As we know, claim settlement is the most critical part of the insurance process; checking the insurer's claim settlement before taking commercial vehicle insurance is important. Claim settlement ratio for every insurance company. It is available here. Before purchasing a commercial vehicle insurance policy, one should always check the claim settlement ratio of different insurance companies and then decide that the claim settlement ratio guarantees the claim settlement to a certain extent. A higher claim settlement ratio implies a higher chance of your claim getting settled. A claim settlement ratio above 96% could be considered better, and for this, one should consider the last 3 years' claim settlement ratio before making an informed decision.
The claim settlement ratio is considered a proxy to analyze an insurance company's claim settlement capacity or claims settlement performance. But in general, this could only be partially true as the claim settlement ratio does not indicate the number of claims rejected and the quantum of claims settled. It also needs to mention if the claims are settled in their entirety. Nonetheless, the claim settlement ratio gives an understanding of the insurance company's performance to a certain extent.
Network garages
The role of network garages in the claim settlement process is immense, as the extended benefits of insurance can be reaped with only network garages. As we all know insurance policy is taken out to get financial compensation in case of loss or damage to the insured property or life, but the compensation could be either through cashless or reimbursement mode. Cashless mode is when the insurance company would directly pay the compensation to the garage without the customer's intervention. In contrast, the reimbursement mode necessitates the customer to pay the claim first and then claim reimbursement from the insurer. Network garages are tied up with the insurance company to provide cashless claims settlement services to the motor insurance customers of that insurance company.
Cashless claim settlement plays an important role during claim settlement as the customers need only to pay the amount if they get their vehicle repaired in any of the network garages. In the cashless claim, the claim amount is paid directly to the network garage without the intervention of the insured customer. Cashless claim settlement reduces the burden on the insured to arrange funds for repair. One should check the list of network garages in their area of operation to availing a cashless claim settlement facility. It is only possible to take the commercial vehicle policy from an insurance company if they have a cashless facility in your area of operation. Since commercial goods vehicles move from one place to another, it is important to ensure adequate cashless garages in your places of operation so that you will avoid trouble in the future.
Add-ons:
Add-ons, also known as riders, are the additional benefit the insurance company provides on payment of additional premiums. Riders would overwrite the terms and conditions of the commercial goods carrying vehicle insurance policy. Riders are like topping on the pizza, which would come by spending extra. The best commercial vehicle insurance policy includes riders or add-ons to help the insured at the time of claim settlement. Riders in commercial vehicle insurance include zero depreciation or bumper-to-bumper coverage, Consumables, key protection, etc. Riders are available only with comprehensive or OD cover as they protect the vehicle. Riders can be taken only for a few years during the lifecycle of the commercial vehicle. For example, the zero depreciation rider is offered only during the first 3-4 years from the policy registration date. Add-ons should be taken cautiously as they come with additional premiums and would increase the overall premium payable under the policy. Riders or add-ons should be selected based on the necessity, which varies from person to person.
Premium:
The most important factor to consider while purchasing a commercial goods-carrying vehicle insurance policy is the premium the insurer charges. A low premium does not necessarily imply that it is the best insurance company, or a high premium doesn't imply complete coverage. One should learn the premium changes by different insurance companies in the market and proceed accordingly.
Premium can be described as the amount paid by the insured customer to the insurance company in return for providing the insurance coverage. This premium should be reasonable for the customer. The premium should justify the coverage offered by the insurance company. Higher premiums discourage customers from insuring their vehicles, whereas lower premiums would bankrupt the insurance companies. Therefore, the insurance companies set the premiums considering all these factors. Commercial vehicle premiums that are too high or low should be approached cautiously by the customers.
Insurance intermediary
After-sales service is an important part of the insurance as the real need for insurance comes not at the time of buying it but at the time of an accident. So, if the after-sales service is unsatisfactory, then the policy's benefits can be exploited partially. For example, if you wanted roadside assistance and your insurance agent is not responsive, it would be easier to manage with proper guidance and support from the other side. After-sales service is an important part of the insurance policy, and the agent would be paid a commission to provide their services after the sale of the policy. For this reason, one should select their insurance intermediary carefully so that the intermediary would always support the customer. Intermediaries play an important role in the insurance purchase process as they provide the best quote and assistance in case of a claim. Insurance brokers are known to provide the best insurance service in the market as they are tied up with multiple insurance companies and provide quotations from multiple insurers simultaneously. It is always advisable to go with an insurance broker as they can provide multiple quotations and advice on the best insurance company per your needs and requirements.