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Wednesday, January 02, 2013

Vehicle Insurance premium to go up based on profession, parking

Vehicle Insurance premium to go up based on profession, parking

Insurance companies are mulling new ways to increase premium. The idea is to link premium to several additional factors such as profession, availability of covered parking space etc. Insurance companies feel that those in professions that need extensive travelling, cars which are parked outside have higher risk of accidents and hence should pay additional premium.

While this proposal is being debated and needs approval from IRDA, I’m sharing some of my thoughts in this post.

We Indians are good at finding loopholes. If a marketing executive or sales rep is asked to pay higher premium because of his profession, he may register the car in the name of his spouse, brother, father etc. Now will the companies go extra distance to say “Hey this car is registered in your name, but in your family one guy is a marketing professional- since he may use a car, you’ve to pay extra”
One’s job might involve extensive traveling- if he proves he always uses office arranged cab for business travel and not his personal car, will he get exemption? (example, a police inspector might be on the road all the time, but will be using police jeep and not his personal car)

While renewing an insurance, can we have odometer reading as a parameter (like no claim bonus, if a car has been used for less than say 36000 kms a year, give a rebate, if used for more than 100000 kms, charge a premium) 

While insurance companies are keen to only increase the premium, it is only fair that they also reduce premiums for low risk customers. In particular, I’ve following questions to insurance companies:

·         If I spend 6 months a year out of country, will I get 50% discount in insurance premium? Those working in merchant navy will be out in the ocean for 6 months every year. Software professionals, cricketers and many other kind of people spend considerable time outside country on work. Army people also won’t be using their personal cars for most of the time when on duty at border. (logically speaking, those who’d spend lot of time in Jail also should be eligible for discount under this category) As they won’t be using their cars during such time, they should get a rebate on premium proportionate to time spent without using their vehicle. Now you may say “Someone else might use the vehicle in meantime”, but this will go back to the logic with which insurance companies are increasing premium- I might be a highly mobile marketing professional, but I may not use my car all the time. I may go out in bike most of the time while my brother, who’s a software engineer might be using the car most of the time. Insurance companies would still charge premium based on my profession, irrespective of usage)
·         If I have a 10 year track record of accident free driving, shouldn’t I get a discount since I’m a proven safe driver? Extending this logic, one with 50 years of accident free driving should get free insurance.
·         If I can prove that I’ll have couple of pilot vehicles around me all the time, will I get a discount? (due to pilot vehicles, chances of my vehicle hitting others is very less)
·         Cars with ABS, EBD, Traction Control, Rain sensing wipers and other safety features, cars which don’t exceed say 100kmph (or those who’ve fixed speed governors),cars with advanced crash test high  scores should get a rebate compared to ordinary cars without these feature (with these safety features, vehicle is less likely to cause an accident)
·         Those who don’t drink/smoke should get a rebate
·         If my house is close to office, I might chose to leave the car at office parking lot and walk back home. Since the car will be safer there, do I get a discount?
·         Those who own the car, but use it only for weekend travel (use office bus or bike or cycle for daily commute) should get a discount in insurance premium, since they won’t be using the car 5 days a week
·         A professional driver-like bus/truck drivers, race car drivers should get a rebate while buying personal vehicle insurance, since due to their experience, they’re less likely to cause an accident

Insurance companies often refuse requests for only 3rd party cover. They try to force customers into buying comprehensive insurance. While insurance premium is supposed to come down every year with depreciating value of the vehicle, the reality is often otherwise, as insurance companies keep increasing the premium rate. Today I read a report that said two third of two wheelers and one third of cars are plying on the streets without insurance.

What are your thoughts on this? Is the idea practical?

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