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Motor claims may fall if bill is passed
June 26, 2018
The general insurance industry is looking for better profitability as it believes that claims from third party may plunge after the government amends a law that would prohibit any claim after six months of the event.
A Bill is pending approval in the Rajya Sabha that will enable insurance companies to reject claims by anyone filing for compensation beyond the stipulated period.
“With delay in filing claims, fraudulent cases go up and it becomes difficult to establish a fraud,” said Vijay Kumar CEO Digit Insurance, promoted by Prem Watsa’s Fairfax. “This will help in faster compensation. It will help insurance companies in accounting of reserves, which will lead to accuracy in pricing.” Once the Motor Vehicles Amendment Bill passes in Parliament, the premium on motor insurance may fall as insurers facing lesser liability could lower the charges on automobile third party premium.
The bill says, “no application for compensation shall be entertained unless it is made in six months of the occurrence of the accident.”
Around 5-10per cent claims are filed after five years of an accident making it difficult for insurers to provide for reserves and settle claims. Insurers are required to set aside funds for incurred but not reported claims and reserves for outstanding claims under third party motor segment as cases go on for longer and in many cases claims are intimated after 5-7 years.
As per the government of India report (Road Accidents in India-2015), about 1,374 accidents and 400 deaths take place every day. There is no legal time limit on claims. The sum insured is unlimited in case of fault liability claims.
Third-party premium differs according to the engine capacity of a car. This financial year, Irda has reduced premium by 11.35 per cent for cars in less than 1000 cc. Motor third party cover is mandatory for all public, private and commercial vehicles. It covers liability arising out of third party claims due to accidents. It covers liability arising out of third party claims due to accidents.
Don’t think your bike needs insurance? Be ready to cough up crores
June 26, 2018
India moves on two wheelers. If you were to look at last year’s numbers, it ranked as the biggest market for two wheelers in the world. 17.7 million of them were sold here last year, while China trailed at 16.8 million units. Although the sales volumes in cities have been consistent, large scale road-construction projects are leading to a pick-up in sales volumes in the earlier under-penetrated smaller towns and villages.
Efficient public transport is still a work in progress in many locations across the country and this coupled with increased traffic has meant that two wheelers have become one of the best and most convenient mode of transport. The increase of leisure riding and demand for sports bikes is on the rise, further fueling the demand.
One must not forget that this mode of transport has its own cons as well. Safety is a concern on two wheelers, even more so than four wheelers. Awareness of helmet usage in the country is not the best, and somehow majority of the riders don’t feel comfortable wearing one. Now this is quite unfortunate if you look at the stats related to motorcycle accidents. About 28, two-wheeler riders died daily on Indian roads for not wearing helmets.
This is for the first time that police and transport departments in states have captured data on deaths caused due to non-wearing of helmet. States have reported that one of every five bike occupants who died in crashes was not wearing helmet. It is unfortunate that many young people are dying in road accidents, as this is the age category, where majority of the two-wheeler usage happens.
This should be enough to make usage of helmet compulsory, but the unfortunate reality is that this is not the case in most states in India. Efforts to enforce this rule in certain states has been met with resistance by the citizens for various reasons. Helmets are a must, and there are no two ways about it. In fact, a study by the United Nations last year had estimated wearing an appropriate helmet improves chances of survival of bikers by 42 percent.
If creating laws to make something compulsory truly worked, all two-wheelers on Indian roads would be insured, as it is mandatory. Unfortunately, the reality is diametrically opposite. On an average the number of insured vehicles plying on the road is just a meagre 30 percent, the remaining 70 percent of all others are uninsured.
Most people only buy a policy at the time of purchase, as it is an absolute must to get the vehicle registration and delivery done. Post this the usual excuse is that they forget to get it done or that it is too much of a hassle or even an unnecessary expense etc.
The guilt of such carelessness only dawns upon them when they are either caught by the police and asked to produce their insurance copy or when they meet with an accident. Even in the latter scenario they are okay to absorb the cost of repair as and when it happens, because the typical mindset is that of, 'I will not meet with an accident' and if it were to happen, fate is used as the go to fall back mechanism. While this might work for the own damage part of a policy, people forget that third party liability insurance is compulsory for a reason.
Did you know if for some reason an accident were to occur and a two-wheeler rider were to cause death or grievous injury to a third party, the amount he or she could be liable to pay could run into crores of rupees. It could destroy a person and their family not just mentally, but also drain them out financially, where a situation of selling precious assets might arise, just to pay the compensation.
If this wasn’t enough, as per the Motor Vehicle Act, driving a vehicle without third-party insurance cover can result into a fine of up to Rs 1,000 or imprisonment up to three months or even both. And all this for what? Saving premium on a two-wheeler insurance which is less than the cost of a cup of tea that you have daily? There is no excuse for not getting an insurance policy for your two wheeler.
For those who forget to renew their insurance, there are now long-term products available for your bike insurance. To cut the hassles of yearly renewals some of the insurers now have introduced long-term insurance policies, whereby you can insure your two wheeler for up to three years at one go, be it third party or comprehensive.
These policies are convenient as they eliminate the need for annual renewals and insulate the customer from any hike in premium for three years. Very soon options to insure up to five years will be available as per the recommendations by the insurance regulator.
It is often said that four wheels move the body, but two wheels move the soul. Most people are attracted to two wheelers because of the sheer convenience, price and cost of operation, whilst others are lured by its pure feeling of thrill, adrenaline and the need for speed. Whatever be your reason, wear a helmet.
You might be a good rider but accidents are not always your fault, and stay secured, get insured, the financial security that an insurance policy offers you comes at a very cheap price as compared to the hassles that your uninsured motor bike may unleash upon you.
IRDA mulls 5-year third party insurance for vehicles; what it will mean for you
Jun 07, 2018
Do you know that more than 60% of the two-wheelers on roads are uninsured and close to 30% Cars? In case of an unfortunate accident, the uninsured vehicle owner may not be able to compensate the victim or his family, thus it is very important for every vehicle owner to have at least third party insurance.
The Supreme Court committee on road safety is of the view that insurers should give an option of 3 years & 5 years Third party Insurance for cars & two wheelers respectively. In this backdrop, IRDAI has asked insurers to file these products & offer these options to the customers.
Animesh Das, Head of Product Strategy - ACKO said that this is a welcome move as it will directly help to increase the Insurance penetration. For a vehicle owner, it reduces the hassle of renewing the policy every year. The customer can buy policy once and get a peace of mind for 3-5 years. In addition to this, customers will get the flat rate for 3-5 years Insurance and thus they will save money against the inflation. If we look at last 5 years, the Third-party Insurance premium (which is decided by IRDAI) for two-wheelers has been nearly doubled & has increased to 2.5X for cars. So, opting for long-term policy will save the customer against these premium hikes as well.
An important point here is that long-term policy for 3 years for car & 5 years for two-wheelers will be offered only for third party insurance and not for the comprehensive cover (which includes vehicle damages). Currently, maximum one-year comprehensive policy for car & three years comprehensive policy for two-wheelers can be offered by insurers.
Also, one should not compare the third party insurance with the comprehensive cover. Third Party insurance is for the damage caused by you to any third party whereas comprehensive insurance policy covers own damage and third-party insurance both.
Tarun Mathur- Chief Business Officer, General Insurance, Policybazaar.com said Third Party insurance and comprehensive insurance policy are two different categories of motor insurance because TP insurance is mandatory by law whereas buying a comprehensive policy is purely a customer' choice to give 360 protection to your vehicle and any damage to other vehicles. “The premium for own damage is charged to cover the cost of repair (basis depreciation) for your own vehicle in case of an accident, fire, theft etc.,” he said.
Given, third-party insurance has low ticket size, usually, intermediaries were promoting comprehensive cover vs third party only. Now with 3-5 years option, Intermediary may find the third party as a lucrative option to offer and thus the availability of these products will increase for consumers which will further result in higher penetration of Insurance.
Devendra Rane, Founder & CTO - Coverfox.com said that long-term policies from the insurers will thus lock-in lower premium rates. At the same time, it removes the hassle of remembering the impending due dates for insurance renewals. This will also motivate vehicle owners to secure their vehicles with a proper insurance, thus increasing the penetration of insurance and thereby bringing the premium rates further down. “IRDAI has recently motivated the people to get their vehicles insured by reducing the third-party premium rates for cars with engine capacity less than 1000cc to Rs 1850 and for two-wheelers with an engine capacity less than 75 cc to Rs 427,” he added.
Motor Insurance: Long-term third-party cover for new private cars and two-wheelers
June 04, 2018
In order to cover more people under the mandatory third-party motor insurance cover, the insurance regulator has advised companies to design long-term cover for new private cars and two-wheelers. At present, the rates of third-party motor insurance are fixed by the regulator every year depending on the engine capacity.
The Insurance Regulatory and Development Authority of India (Irdai) note underlines that third-party insurance should be five years for two-wheelers and three years for four-wheelers. Half of the vehicles plying on the roads are uninsured despite the third-party insurance being mandatory. “With a view to ensuring that these uninsured vehicles are covered against motor third-party insurance, the Supreme Court Committee on Road safety is of the view that general insurance companies should issue long term insurance covers, namely five-year policy for two-wheelers and 3-year policy for four-wheelers,” the communication from Irdai to non-life companies says.
The regulator underlines that long-term third-party insurance will reduce the hassle of renewing the policy every year, and an increase in the number of insured vehicles could bring down the rates as the risk pool becomes larger. It will also ensure that the policyholder has some stability in rates for a defined period. For insurers, too, such a move will increase the number of insured vehicles and lead to higher penetration and premium volumes. Also, an increase in critical mass could mean better experience.
Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance, says with long-term third-party cover policyholders will not have the hassle for renewing their motor insurance every year. From the industry point of view, he says risk will be high, as during the long terms the laws keep changing and the losses could also go up. “We are awaiting further clarity from IRDAI on how this is going to be priced, since the long term premium can’t be priced on the lines of the current one year rates and long term inflation rates will also need to be considered,” he says.
Rates fixed by IRDAI
For 2018-19, the insurance regulator had reduced the premium rates for motor third-party insurance. The premium for cars with engine capacity of less than 1,000 cc was reduced from Rs 2,055 to Rs 1,850. There has been no change in the existing rate for cars with engine capacity higher than 1,000 cc. Similarly, the premium on two-wheelers with less than 75 cc engine was lowered from Rs 569 to Rs 427. However, the premium on two-wheelers over 350 cc has gone up from Rs 1,019 to Rs 2,323.
Motor insurance comprises own-damage and third-party insurance. Any vehicle that plies on the road needs the mandatory third-party cover under the Motor Vehicles Act and insurers will have to ensure that the policy is available at each of their underwriting offices. To arrive at the new third-party motor premium in April ever year, Insurance Regulatory and Development Authority of India (Irdai) analyses the data on accidents given by the Insurance Information Bureau of India.
The rates are fixed by the regulator depending on the engine capacity and the vehicle owner has to pay the amount every year. No insurer can give any discount on the third-party premium fixed by the regulator. Then, there is own-damage premium which is fixed by the company depending on their underwriting losses and this is where one can negotiate the premium with the insurer.
Third-party liability is decided and awarded by the judiciary taking into account the age of deceased, earning capacity, wages, etc., which keep rising due to inflation and other factors. The Motor Vehicles (Amendment) Act has substantially increased compensation for accident victims.
Considering the mandatory nature of third-party insurance, Irdai had asked insurers to ensure that the cover is made available at their underwriting offices and through all available channels of distribution. The reported claims frequency is the highest for the goods carrying segment, followed by passenger vehicles and private cars.
Policyholders should look at a comprehensive cover which takes care of the own damage portion, especially loss or damage due to fire, explosion, accidents or while in transit by road or rail, and even burglary and theft. A comprehensive motor insurance cover comprises own-damage and third-party insurance.
What is a critical illness insurance plan?
June 04, 2018
A critical illness policy is a defined benefit health insurance plan. Defined benefit plans pay you a lump sum on an insured event. So unlike a basic health insurance plan that will pay up the costs you actually incurred due to hospitalisation, a critical illness plan will pay a lump sum amount. For this reason a critical illness policy not only helps you pay for incidental expenses, but also supplements your income in case you are unable to work because of the said illness.
There are many types of critical illness plans in the market. While some focus on a few ailments, others cover a wide range of critical illnesses. A typical critical illness policy will cover illnesses such as cancer, coronary artery bypass graft surgery, kidney failure, heart attack, major organ transplant and stroke.
You can either buy this as a stand-alone policy or as a rider with a life insurance policy.
Both life insurance as well as non-life insurance companies offer critical illness plans. Remember to read the exact definition of the illness.
You also need to remember that most critical illness plans come with a survival period of 30 days after the diagnosis of a critical illness. It’s only after the policyholder has survived this period that the claim is settled.
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