Insurance premium on diesel vehicles may rise by 30% as insurers plan to compensate themselves for higher liabilities in the segment, dealing yet another blow to auto sales that have been slowing due to high interest rates. General insurance companies, facing steep losses in motor policy claims, also plan to factor in regional behaviour on claims to finalise premium, said two people familiar with the development. This will translate into customers in north India paying higher premium for damages and customers in the south paying more for third-party insurance. An individual travelling long distances mostly chooses a diesel vehicle, leading to higher exposure to risk, which may increase the premium, said Vijay Kumar, head of motor insurance at Bajaj Allianz General Insurance.
Fuel has become an important rating parameter with the growing preference for diesel vehicles. Automobile insurance premium is on the rise as insurers say claims are disproportionate to the premium income. Motor claims ratio is about 75% of the insured amount for the industry. Claim ratio in thirdparty motor insurance is as high as 180% due to which the regulator has allowed a rise. The finance ministry is also debating whether to raise the duty rates on diesel cars as consumers shift to diesel versions to escape the spiralling price of petrol. Car sales growth slumped to 7% in May, from a record high of 30% in March. Marutis sales rose 1. 9%, its lowest since July 2008. The impact on sales of diesel cars will depend on the difference in the premium charged by insurers on diesel cars as compared to petrol cars, said Rajan Masurkar, a Maruti Suzuki dealer. Companies are factoring in features such as location, model and age, and that will soon include demographic behaviour of the driver and the miles driven. We have already factored in location, model and age of the vehicle. We are working on creating a database for the demographic behaviour and fuel type of the vehicle, said Nilesh Garg, executive director, ICICI Lombard General Insurance.
A diesel car owner may be charged 10% loading on premium compared to a discount of 20% given on petrol-driven cars. This makes diesel motor insurance rates 30% costlier than for petrol cars. Diesel cars are mostly used for commercial purposes and exposure to risk is higher, said Garg. For example, the premium charged on an Indica petrol car would be 30% lower compared to the diesel version. Location has become an important criterion for deciding annual premium. According to insurers, motor owners damage claim is higher in north and west while third-party claims are high in east and south. Based on this, premia are 5-10 % lower in south and west. Although the claim ratio in own damage segment is significantly lower compared to third-party covers, the average claim size has gone up by 15-20 % in the past year owing to the increase in car prices. Car insurance has two components : own damage cover, which is triggered when the vehicle is damaged in an accident;and third-party liability, which covers any damage caused to another persons life and vehicle. Third-party liability insurance is compulsory in India. Motor insurance has become an important segment as out of the42, 550 crore gross written premium collected in 2010-11, insurers earned18, 039 crore solely by underwriting motor insurance, including own damage and third-party liability. (With inputs from Lijee Philip). - www.economictimes.indiatimes.com
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