Lowering Down Auto Insurance Premium

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As per the Insurance Regulatory and Development Authority (IRDA) car maintenance is expected to become more expensive from April 2012. The regulatory body of insurance in India has increased the premiums of third-party motor insurance programs. This is a part of the decision taken by the body in 2011 to review its insurance rates every year.

A couple of insurers are looking to change their ‘Own Damage’ rates thanks to the losses suffered in the motor insurance policies of late. All these factors suggest that automobile insurance policies in India are going to be dearer. The premiums for third party insurance policies can increase anywhere between 4 and 15 percent depending on engine capacity of the two wheelers or cars.

In India, third party insurance cover is obligatory and includes a detailed motor policy. It comprises damages caused to an individual’s property and injury or death of a third person. The amount of increase in the own damage part of premium payments is yet to be determined though.

In case of an all-inclusive car insurance policy the premiums can go up by almost 10 to 20 percent. Since 2009, the rates for comprehensive auto insurance plans in India have increased by 35-40 percent.

How to save auto insurance premium – way 1

According to the current laws, the minimum cover for compensating third parties in case of property damage is 6 thousand rupees. The insured can go for higher amounts that are useful in case of big payouts but these benefits come with greater premiums. So, it is better to choose the lowest limit of regulatory limited liability requirement if the aim is to restrict the premium to the minimum possible level.

How to save auto insurance premium – way 2

In case of a year without claims, the insured can ask for a no-claim bonus (NCB). However, if the insured does not make any such claims for a couple of years, the cover can be increased by 50 percent because of the NCB. This is why, experts advise insured automobile owners to not make a claim for negligible causes like small dents.

They have laid down a simple formula – provided the amount to be spent in repairs is lesser than the NCB, it is a sensible option to bear the expenses. The accumulated NCB can be used when the insured tries to buy a new car. It is interesting to note that NCBs are connected to the policyholders and not the policy or the car itself.

The CEO and MD of Bharti AXA General Insurance, Amarnath Ananthanarayanan, has advised that policyholders can also increase their deductible amounts. This is similar to letting go a small claim – the insurers pay their share but after the policyholders have paid the expenses as per the pre agreed initial sum.

How to save auto insurance premium – way 3

It has been observed that insurers are more eager to cover customers who are ready to provide personal information such as:

  • age
  • occupation
  • gender
  • claim history
  • marital status
  • driving track record

Berkshireinsurance.com, which is responsible for the distribution of the motor insurance policies of Bajaj Allianz, provides a 5 percent discount to ones who provide personal details in the insurance forms.

The CEO of Berkshireinsurance.com, Arun Balakrishnan, states that this information will be helpful in the long term for the customers. He cites an example - for the same coverage amount the premium will be more for a young man who is a regular smoker compared to a young lady of similar age and without such habits.

The CEO of insurancemail.in, Niraj Jain, states that the amount of discount is dependent on the individual service provider but the rates normally vary from 10 percent to 25%.

How to save auto insurance premium – way 4

The policyholders need to be careful about agents who try to force any of the following ad-on features on them:

  • Depreciation cover
  • Emergency expenses
  • Roadside assistance
  • Hospital cash

This has become a major problem of late with the detariffication of the automobile insurance sector. Nowadays there are several products that have such features. The policyholders need to compare the benefits on offer with their requirements before they avail the additional features. This will make sure that the premiums do not become an unnecessary burden for options that might never be useful for the insured.

How to save auto insurance premium – way 5

If the policyholders become members of the Automobile Association of India (AAI) or any of its affiliated bodies, they can claim some special insurance related privileges like reduced rates of premium from some insurers. The discount will be the lower amount among the following options:

  • 5 percent
  • INR 200 on the own damage premium of private vehicles

Likewise, if a policyholder gets an anti-theft device that has been approved by the Automotive Research Association of India (ARAI), he can ask for 2.5 percent discount. However, the maximum discount granted in such cases is INR 500. The insurance premium can also be brought down by purchasing the policy online and making sure only the resale value of the car is insured.

Increased premiums of auto insurance plans – the present situation

Several policyholders such as Sahil Bade, a resident of Mumbai, have stated that with the increased premiums they will now compare various plans to get the best possible offer. Some policyholders will avail deductions through online purchase and no-claim bonuses.

The insurers such as ICICI Lombard are looking at various factors that can effectively address the situation. Sanjay Dutta, the head of the organization’s customer service department, says that proper market research will have to be done to find out how the customers can be benefited. He says that any policyholder can get a discount of 10 percent in the present circumstances.

As of now the following factors, related to the car, are being considered for providing discounts in case of auto premiums:

  • age
  • fuel
  • model
  • safety devices

They will also be adding the following criteria, related to the driver, to the list of criteria for providing discounts on auto insurance premiums:

  • age
  • credit history
  • profile
  • number of miles driven
  • gender

Young customers and ones who do field jobs such as journalists or salespeople are being regarded as risky propositions. Majority of the insurance providers regard ladies, and especially ones in the senior citizen category, to be safe drivers.

Ownership of a car will be an important factor in this regard – cars provided by employers are regarded as less risky as a result of the high levels of maintenance involved for the companies. If the car owner has proper parking facilities for the car, the discount will be good because of the higher levels of protection.

The discounts will get up in case of cars with low mileage. This has been confirmed by Amarnath Ananthanarayanan who has stated that companies are working hard to come up with clauses that enable them to differentiate the good drivers from the others. The safe drivers will be provided proper discounts for renewal of premiums.

Certain geographical factors will also come into play while deciding the premiums. Areas such as the National Capital Region and other belts in the northern part of India are regarded as prone to theft and thus more risky, which implies higher premiums.

The availability and expenses incurred in spare parts is also a critical factor in this context as components made in India are inexpensive compared to the imported parts. Experts are predicting that the decision to increase auto insurance premiums can be implemented in 2012 itself.

The President of the motor insurance division of Bajaj Allianz General Insurance, Vijay Kumar, feels that conditions such as driving records and credit history will be implemented later on as some time will be required for procuring the relevant information from the new and existing clients.

Some insurers have already started the procedures and the others are supposed to follow in a short time.

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Last Updated on 4/12/2012