Motor insurance is witnessing a growth of approximately 10% every year, and had a retention ratio of 87.15% in the financial year 2021. The industry retention ratio is an important parameter to understand the number of customers who continue their insurance coverage after the initial term has expired.
These figures are an important factor to understand the importance of motor/vehicle insurance in India. With increasing demand of the automobile industry, especially after the pandemic, has directly impacted the growth of vehicle insurance.
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Despite the kind of vehicle you own, there are certain factors to keep in mind. These factors have a direct influence on the kind of insurance plans you will be able to fetch –
Model of vehicle
The premium varies based on how expensive the vehicle is. For eg. more expensive cars with a higher engine capacity (exceeding 1500cc), like luxury sedans and SUVs, have higher premiums, while base car models with lower engine capacity (below 1500cc) have lower premiums. Also, the premium for riskier cars such as sports cars is generally higher when compared to slower, standard ones. Cars with higher cubic capacity or those that run on gas or CNG usually have higher premiums.
Insured Declared Value(IDV)
IDV is the maximum amount of sum assured that you can claim from your insurer for a damaged or stolen car or, in simpler terms, the estimated worth of your vehicle at the time of insurance. IDV may vary depending on the current ex-showroom price and depreciation of your car. Therefore, the older your car gets. the lower the IDV.
Vehicles with more safety devices help you with low premium rates, provided you take care of them. If your car is fitted with safety amenities like gear lock, GPS, and airbags etc., the risk of it getting stolen decreases by a significant percentage. This gives confidence to the insurance provider that there won’t be frequent insurance claims and will consider these amenities while setting the premium rates.
Location where you live
Theft increases in areas with high unemployment, or in congested localities and same with the accidents. If you are living in an accident prone or a theft prone area, the chances of your vehicle getting stolen or broken increases, hence, you end up having high premium rates and vice versa. Also the earthquake and flood prone zones adds on to a higher premium.
As is the case, the cost of a premium of your car insurance has as much to do with you as with your car. The premium of car insurance in India is generally determined by the car owner’s driving record. This means that you enjoy better rates of car insurance premium if you have to have a good driving record in the form of No Claim Bonus.
The premium could be higher/lower depending on the kind of coverage the vehicle requires. A comprehensive car coverage usually has a higher premium. The price of your car insurance premium also increases with the add-ons that you purchase such as zero depreciation cover, cost of vehicle towing in case of a breakdown, increased third party liability, protection of NCB benefit, and many others. While these add-ons may add to the policy premium, but the benefit and peace of mind that these bring in real-time use, is to be thankful for.
For eg, if you meet a bad accident and your car undergoes severe damages, having a zero depreciation cover would reduce your losses to a bare minimum, as most of the expenses (repair or replace) for both plastic and metal would be accounted for full value otherwise 50% depreciation is applicable on all plastic and glass part.
Frequency if claims
Insurers provide rewards, in terms of premium discounts to those who haven’t made any claim to the policy throughout the year. Hence, it is one of the important factors affecting your policy premium. This reward is also termed as a “No claim bonus(NCB).”
Gender and Age
It might sound a little weird, but there is a statistic, stating that young men are more prone to accidents than young women, which is why, premium rates are higher for young men as compared to young women.
While developed countries have already accounted loading age, gender etc. India is also likely to consider these in near future.
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