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Small cars have higher insurance loss ratio than SUVs

Mar 19, 2018

Insurance companies generally tend to believe that SUVs or mini-SUVs would have higher loss ratio and hence they price the premium accordingly, while they overlook the potential of small cars to make claims. But a study has found that SUVs like Scorpio or Fortuner have lesser loss ratio compared to ones like Eon, Alto and Celerio.

As per the data pulled out by PolicyBazaar, SUVs and mini-SUVs demonstrated a very good and profitable loss performance across different models of companies, including Mahindra, Honda, Toyota, Maruti and Hyundai. Creta reported a loss ratio of 32 per cent, Fortuner 45 per cent, Ertiga 52 per cent, Scorpio 60 per cent, XUV 500 62 per cent and Innova 67 per cent.

However, some of the smaller cars like Eon has 86 per cent loss ratio, Alto 70 per cent and Celerio 74 per cent. Among the hatchbacks, Swift reported a loss ratio of 78 per cent, I20 88 per cent, Etios Liva 110 per cent. Some of the sedans too have a higher loss ratio- Amaze 84 per cent, Corolla Altis 104 per cent and Etios 82 per cent.

“The loss ratio among different segments comes as a surprise. Usually, insurance companies believe that the loss ratios of SUVs are higher. But these are SUVs owned by digitally-aware customers who renew the premiums online. Their usage might be different from people who frequently use their cars for long drives. But the pricing is uniform across customer segments,” said Vaidyanathan Ramani, head, Product and Innovations Center,

When it comes to small cars and hatchbacks, the popular notion is that they are mainly for city use, hence insurers tend to price the premiums lower. On lower premiums, the loss ratios become higher.

The study also found that metros had lesser loss ratios compared to their regions. In case of the NCR region, Delhi had an average loss ratio of 66 per cent, much lesser than other parts of the region like Noida with 87 per cent, Faridabad 87 per cent, Ghaziabad 72 per cent and Gurugram 75 per cent. Mumbai had a loss ratio of 48 per cent, much lower than 63 per cent for the whole of Maharashtra.

“The cars in the cities do not get a chance to over-speed and even if they bump into each other, the severity of the damage is less. That is not the case with cars that ply on highways. Insurance companies have been looking at the regions as a whole in terms of loss ratio. But that is not the true picture,” said Ramani.

The brand of the car too makes a difference. Maruti and Hyundai had lower than average loss ratio of 68 per cent and 72 per cent and some brands like Skoda and Volkswagen had above 100 per cent. “The cars which have higher safety standards tend to make larger claims for replacing more number of parts on damage,’ he said.

PolicyBazaar also found that claims ratio was lesser among customers who bought the policies online on their own compared to those who bought it online with some assistance.

Have you checked if your insurance agent is blacklisted?

Mar 19, 2018

Picture this. You get a call from the friendly neighbourhood agent to buy a policy now that only last few days of the financial year remain. "Buy it now to save taxes," he says. You do as he says but realise later that he is not an authorised agent and has fled with the cash.

Annually, about 4000-5000 policies are fraudulently sold by agents who have been blacklisted by companies. Since they have been associated with insurance companies in the past, these agents have all the policy documents needed to close a transaction. Since none of us bother checking the agent's licence, there is a chance of being duped.

All insurance companies are required by Insurance Regulatory and Development Authority of India (IRDAI) to disclose the list of blacklisted agents on their website for customers. This also gives the customer an idea of why an agent was terminated from service. Further, IRDAI also has launched a common portal wherein the list of insurance agents and the company they work for, can also be verified in the future.

Often, fraudulent persons, knowing fully well how policy sales work, cheat customers and collect the first year premium and flee. Usually, they demand the premiums in cash so that they do not leave any trail behind. In some cases, individuals have also received calls to surrender existing policies and buy "special double the investment" plans with bonuses from IRDAI.

Due to these incidents, IRDAI has mandated insurers to display in all their print and television advertisements that the regulator does not declare any bonuses nor does it sell any policies.

One simple way would be to verify the licence issued by the insurance company to the agent. They can visit the insurance company's website and cross verify to see whether they are still associated with the company. Since there is a lag in updating the blacklisted agents' list, a customer can get the agent's licence number and call up the customer care to check if he is still an active agent with them.

Insurers usually take no responsibility against unknown persons selling their policies and even if a complaint is made, it will be rejected.

With some customers still buying insurance at the end of a financial year and usually in the last two weeks of March, they are an easy target for unscrupulous agents who misuse the system. While rushing in to complete the tax savings for the year, it will be a good idea to invest a few minutes in ascertaining the identity of the agent you are buying it from. Else, you could be taken for a ride.

More Indian companies taking cyber insurance cover

Mar 16, 2018

The ransomware attacks over the past two years has significantly increased Indian companies’ desire to take cyber insurance.

Gurgaon-based Secure-Now, an insurance brokerage and risk advisory firm that works with companies in the e-commerce and mobile wallets space, said it saw a 200% increase in demand for cyber insurance last year, compared to the year before. Tapan Singhel, MD and CEO of Bajaj Allianz, which has sharply scaled up its cyber covers, says two years ago, they would rarely see such a demand from companies for cyber insurance.

Cyber insurance covers loss or damage to data, network downtime, cyber extortion, customer data breach, and loss of intellectual property. Insurance providers first do an assessment of a company’s cyber security and data resilience status, and then provide appropriate covers.

‘Cyber is no longer a separate risk’

In May last year, the WannaCry ransomware attack is estimated to have infected more than 230,000 computers in over 150 countries in just one day. The following month, the Petya attack again impacted many countries. India was the third most affected country by the WannaCry attack, according to estimates by security solutions company Kaspersky Lab. Startups like Uber and Zomato also suffered data breaches last year. This has had its impact. “Three or four years ago, we would have to pitch to clients on why they should secure their company. Now, we have inbound interest from companies, especially e-commerce and consumer facing companies that keep third-party data,” says Abhishek Bondia, founder of SecureNow.

Vivek Chudgar, senior director — Asia Pacific for US-based security company FireEye, which does assessments and forensic investigations for insurance companies, says companies have come to realize the big risks involved. “Cyber is no longer a separate risk. Companies are at risk of losing information to competition and that has made them aware,” he says. FireEye, in partnership with insurance brokerage firm Marsh India, will launch several initiatives in the cyber insurance space later this year.

Delhi-based Lucideus is a cyber-assessment company that provides ratings to companies based on their cyber maturity. These assessments are used by insurance brokers and cover providers to decide on premiums and appropriate solutions. Saket Modi, who started Lucideus in 2011, says companies are now proactively doing cyber assessments. “With even SMEs being digitally enabled, the demand is growing,” he says, adding that cyber assessment may become a mandatory requirement in the next five years.

Traditional insurance cover providers like ICICI Lombard and Bajaj Allianz, which were selling cyber covers in a small way, are now scaling up with new solutions. Bajaj Allianz launched cyber insurance covers for individuals last year, where it provides security covers between Rs 1 lakh and Rs 1 crore. The insurance provider says it saw a 50% increase in this retail business in each of the past two years. Enterprise covers have gone up to $50 million. “They are mainly for malware attacks,” says Singhel.

For a Rs 5 crore cover, the premium usually ranges from Rs 5 to 10 lakh for the manufacturing industry, education sector, and for consulting, accountancy and similar professional services. It can go up to Rs 25 lakh for financial services, healthcare and telecom industry, which are more vulnerable to attacks. Security experts say insurance is still at a nascent stage in India, at least five years behind that of the US ecosystem. Most companies are still not very serious about it. Currently, most of the demand comes from the online retail and IT service sectors that deal in crucial third-party user data.

Source: The Times of India

IRDA’s revised motor insurance premium rates from April 1: What it would mean for you?

Mar 13, 2018

The Insurance regulator Insurance Regulatory and Development Authority of India (IRDAI) has proposed to reduce third party premiums for FY19 in certain segments starting April 1. This reduction in the premium rates will encourage the vehicle owners to get the mandatory Third-Party Motor Insurance for their cars and bikes.

It will also provide insurers with an opportunity to come up with cheaper comprehensive insurance policies that provide financial assistance in case of an eventuality to the owner’s vehicle.

Third Party Insurance Rates for Two-Wheelers

IRDA’s new third-party premium rate is good news for riders who are riding two-wheelers with having less than 75 cc engine. The proposal made for the current cost of third-party premium has been reduced from Rs 569 to Rs 427. Under this scenarios, the consumers will now save Rs 142 this year. There is also a relief for other two-wheelers exceeding 75cc but not exceeding 150cc, the rates have not been proposed to change this year, it will still remain at Rs 569 only.

However, if you are riding a Bullet 500 or a Bajaj Dominar or any other bike of above 350cc, or any other two-wheeler exceeding 150cc but not exceeding 350cc, you have to pay a higher premium this year. The premium rates for this segment may increase to Rs 2323 for bike above 350cc and Rs 985 for two-wheeler exceeding 150cc but not exceeding 350cc which, as compared to last FY 18 stood at Rs 1019 and Rs 887 respectively. "Third party rates have gone up by roughly 20-40 percent in the past few years. This year’s draft regulation has proposed a change of 126 percent for 350cc and above segment, 10 percent for 150cc to 349cc while there would be a slight decrease or no change in other segments,” said Tarun Mathur- Director,

Third Party Insurance Rates for Small Cars

The proposed premium rates for small cars not exceeding 1000cc, falling between 1000cc to 1500cc and exceeding 1500cc has been revised to Rs 1850, Rs 2863 and Rs 7890 respectively, which have been kept lower for small cars not exceeding 1000cc only. However, other rates remain the same this year as for last year’s rates. The premium rates for last FY 18 stood at Rs 2055, Rs 2863, Rs 7890 respectively.

“This is a good move by IRDAI as for the owners of small cars, it will be a slight relief in their pockets. But simultaneous proposal on the increase in premium amount for bikes with heavy engine capacity will definitely upset the buyers. Lowering the premium amount rate should motivate a car buyer and it will also raise the awareness about the importance of insurance,” said Naval Goel CEO & founder of

Devendra Rane, Founder & CTO - said that till now the vehicle owners were already reeling under the constant increase of Third-Party Insurance rates year-on-year. Also, with the implementation of GST, the tax rates were increased from 15% to 18%. This increase of 3% contributed towards a higher total premium payable by the consumers.

“The year-on-year increase in the third party motor insurance premium rates clubbed with the increased GST rates have been putting off vehicles owners, especially in tier 2 and 3 cities and other rural areas from covering their vehicles with the mandatory Third Party Insurance,” he added further.

Third Party Insurance Rates for Taxis

If you own a commercial vehicle, the proposed rates for taxis not exceeding 1000c, falling between 1000cc to 1500cc and exceeding 1500cc stands at Rs 5437, Rs 7147 and Rs 9472 respectively, which have been kept at a lower rate this year compared to last year’s rates. The premiums for last FY 18 stood at Rs 6396, Rs 8408, Rs 11144 respectively.

There is a significant decrease in premium for taxis and low-segment cars and bikes which is a welcome relief for a significant individual-customer segment. IRDAI revises the rates every year based on claim experience in the past and we hope the lower rates are in line with the lower claim risk for these segments.

Biresh Giri, Appointed Actuary, Acko said that for most other segments the premium has been kept flat this year after increasing every year for the past 4-5 years. This will also come as a good news for the customers. For some small segments such as high-end bikes and some segments of goods carrying vehicles the premium is proposed to be increased which might be because of higher claims for these segments.

“The IRDAI’s role has been commendable in slowly and steadily increasing the Motor Third-Party premium rates over the past couple of years where it has now reached a level which is acceptable to customers and more sustainable for insurers,” he said.

However, these are only proposed rates for comments from the industry and the final roll-out is expected by the end of March.

Important Terms You Should Know Before Buying a Car Insurance Policy

Mar 13, 2018

A car insurance policy, when carefully purchased, can provide you comprehensive coverage against accidental damages, hospitalisation expenses, and natural and man-made calamities. Given how useful these policies can be in protecting your dream car, it is essential that you first familiarise yourself with certain important terms before purchasing a car insurance policy, in order to fully understand what you are signing up for.

1. Third-Party Liability Cover: As the policyholder, you are the first party. The insurer, who will settle the claim, is the second party. The third party is an individual who might be involved in an accident, and as a result suffers from accidental injuries or damages to his/her property or assets. Thus, motor insurance policy providers offer third-party liability-only covers, which provide coverage against legal liabilities of the third-party’s hospitalisation expenses and property damage. As a vehicle owner, it is necessary for you to purchase, at the very least, a third-party liability-only policy for your car, as per the Motor Vehicles Act, 1988.

2. Comprehensive Insurance Cover: Unlike third-party liability insurance which only offers a cover against legal liability to a third-party, a comprehensive insurance policy, like the name suggests, offers a higher degree of protection to the policyholder. Most comprehensive insurance plans provide coverage against third-party liability, personal accidents, vehicular damage due to natural or man-made calamities (own-damage), and theft or loss of the vehicle. While comprehensive insurance plans are more expensive than third-party liability insurance policies, the enhanced coverage make them a worthy investment.

3. Insured Declared Value: The Insured Declared Value or IDV is the maximum amount of money that you will be eligible to receive from the insurer in case of total loss of the vehicle. Thus, IDV will be calculated based on the current market value of the vehicle, and thus depreciation is taken into account. If the IDV of your vehicle is less, you will have to pay a lower premium, and vice versa. However, the lesser the IDV, the lesser you will receive as payout in the event of a claim. Thus, when you are purchasing a car insurance policy, make sure you pay keen attention to what IDV is fixed by the insurer for your car.

4. No Claim Bonus: The no claim bonus is a discount or bonus that you receive from the insurer for not making any claims during the policy year. Thus, the no claim bonus is how insurance providers reward you for your safe driving. This bonus that you receive can be applied to your own damage premium and can help reduce your premium payable. Most insurers also allow you to accumulate your no-claim bonus up to 50%, thus giving you a significant discount on your premium payable.

5. Deductibles: A deductible is that portion of the claim amount that will have to borne by the policyholder. Deductibles can be of two types – voluntary or compulsory. In the case of compulsory deductibles, the deductible percentage will be fixed by the insurer, and the policyholder will have to mandatorily pay that percentage of the claim. In the case of voluntary deductibles, the policy buyer will have to choose the deductible percentage. Opting for a deductible can reduce your payable premium. However, you should only opt for it if you have the capacity to pay the resulting claim amount.

6. Cashless Garages: Like how you can avail cashless treatments at network hospitals when you have a health insurance policy, you can also get your vehicle serviced or repaired at a cashless garage when you purchase a motor insurance policy. However, you can’t avail this benefit at all garages. Only garages that have a tie-up with your insurance provider will provide you this option. Thus, make sure to carefully consider how many garages fall within your insurer’s network before purchasing a car insurance plan.

7. Endorsements: Post purchasing your policy, if you need to make any changes to the policy document, this can be done by way of an endorsement. Thus, in case you already have purchased an insurance policy and then happen to make certain modifications to your car or there happens to be a change in the ownership, you will have to inform the insurer about this. The insurer will then create an endorsement and attach it your existing policy document.

8. Add-Ons: Add-ons can be compared to riders that are offered by health insurance or life insurance policy providers. Motor insurers offer a number of add-ons that you can purchase for an additional premium and link to your base policy. By way of the add-on, you will be eligible to avail a more enhanced coverage and receive more benefits in case of an untimely accident/theft/loss. Some of the popular add-ons that are offered by insurers include the Zero Depreciation Cover, Return to Invoice Cover, Personal Accident Cover for Co-Passengers, 24x7 Road Assistance Cover, Key Replacement Cover, etc. Make sure to consider your needs and opt for an add-on wisely to make the best use of your plan.

9. Personal Accident Cover: If you happen to purchase a comprehensive two-wheeler insurance or car insurance plan, you, the owner/driver of the vehicle, will be provided a personal accident cover. Thus, in case you happen to meet with an accident and incur hospitalisation expenses because of it, your insurance policy will provide a cover against these expenses, up to a certain amount that will be specified to you at the time of purchasing your insurance plan. Thus, the personal accident cover can supplement the coverage provided by your Mediclaim or health insurance plan.

A car insurance policy will provide you a much-needed cover against expenses that you might incur in the event of an accident. Thus, make sure to compare various car insurance plans that are offered by insurance providers, request for premium quotes, read through the policy brochure and list of benefits, and opt for a policy that is best suited to your requirements.

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