Date:24/07/2006 URL: http://www.thehindubusinessline.com/2006/07/24/stories/2006072402810100.htm

Back Car cos seek best insurance deals

Radhika Menon
Mayur N. Shah

Free-pricing scenario to replace predetermined tariffs from January 1

Mumbai , July 23

Auto manufacturers are seeking the best motor insurance rates from insurers, as premium is expected to slide by 20-25 per cent in the private car segment.

Come January 1, 2007, the predetermined motor insurance premium rates or tariff will be replaced by a free-pricing scenario. So, manufacturers hope that a lower motor insurance premium would help increase sales.

Rating factors

Mr M. Ramadoss, CMD, Oriental Insurance Company, said that motor insurance premium in the private car segment was likely to fall by 20-25 per cent while in the commercial vehicles segment, third-party premium would rise by 20-25 per cent. Although there can be as many as 75 rating factors to determine motor insurance premium in the de-tariffed regime, insurance company officials said that the key factors that will be taken into account would be the model of the car, cost of the spare parts, profile of the driver, geographical location and the incidence of theft.

Maruti Udyog Ltd, the largest car manufacturer in India, which holds 54 per cent of the market share, could be the first to get a lower rate. Maruti Udyog had a series of meetings with National Insurance Company, New India Assurance and Bajaj Allianz General insurance to understand the rating factors for judging motor insurance premium.

It is learnt that the car manufacturer and National Insurance Company are currently working together for procuring a software solution from a UK-based software company to generate a database on motor insurance claims.

Brand and premiums

"The insurance premium may soon play a major role in deciding which car one should buy.

Ownership cost, claims ratio, safety parameters of the vehicle and the driver's profile and record are some of the parameters that will determine the overall premium of the new vehicle," said a senior official at Maruti Udyog.

"Auto manufacturers will have to come up with strategies in a detariffed situation. For instance, if a car has a safety device in a theft prone area like Delhi or Chandigarh, then it will attract a lower premium," said Mr Mahendra Dhruva, National President, Institute of Insurance Surveyors and Adjusters.

New policies

Currently, motor insurance contributes around 40 per cent of the Rs 18,000 crore non-life insurance premium pie. While the detariffed regime will begin after January 1, 2007 existing contracts will be maintained until April 1, 2007, which is when new products will come into effect.

"Insurance companies may now work on concepts like deluxe policies where there could be a `no-depreciation clause' but the premium will be higher. They could even introduce a `courtesy car system' where if a car is damaged then another car is given to the customer until the repairs have been done," said the CEO of a private general insurance company.