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New players selective on car insurance

Freny Patel

If you own a Qualis, Lancer, Palio, Indica or a Sumo, you are unlikely to get motor insurance cover from the new insurance players.

Leading private insurance companies-Bajaj Allianz General Insurance, Tata AIG General Insurance and Iffco Tokio Marine General Insurance-are discouraging their offices from writing motor insurance policies on these models because they are considered to give high loss-claim ratios.

The reason behind this policy is that these models are used as private taxis despite the Road Transport Office granting them licences on the condition that they be used for individual use.

Private taxis experience greater wear and tear. Moreover, say industry sources, in cases where the cost of replacement of parts is high, some insurance companies are either unwilling to insure models like the Qualis and Palio, or are incorporating high deductibles in the wordings of their policies.

Unlike their state-owned counterparts, the private players are more prudent in their underwriting skills. This is evident in the terms and conditions for the vehicles they choose to insure.

"Our strategy is to identify and single out models that are consistently giving us high loss ratios, and at the same time to aggressively target the profitable ones," said Kamesh Goyal, chief operating officer at Bajaj Allianz.

A senior official at a private insurance company said: "There is provision for depreciation worded in the policy document as a result of the high cost of replacement of parts. The idea is not for the insured to benefit from taking the risk cover. Hence, he should also bear part of the replacement cost".

There is 30-40 per cent depreciation on insurance claims as a result of damage to parts. However, this does not apply to the servicing of the car, the official added.

As the new players do not have a strong and sizeable direct agency force, most of them depend on intermediaries like car dealers and finance companies and refrain from tying up with dealership outfits that sell models giving high losses. Risk covers sold by new players are usually restricted to new cars.

"It is not purely the model that we go by, but the usage of the car. Private taxis tend to go through more wear and tear. Third-party losses are equally high," said the official. Private cabs, in his opinion, can include the Ikon, City or the Cielo.

"We cannot use standard criteria in writing motor business," he stated, adding that companies needed to scrutinise proposals before granting cover.

In filling out proposal forms, new players are stressing the occupation of prospective policyholders, profession, and even address.

"We may consider insuring these models on an individual basis, but the car owner will have to produce his past policy, showing his claims experience".

New players in the insurance field are adopting global underwriting skills because claim ratios are high in the motor business.

Experiences of state insurance players indicate a loss ratio of over 130 per cent. For every Rs 100 in premium, state insurers are paying in excess of Rs 130 in claims.

New players are yet to complete a year of writing motor business. The claim ratio experiences of Bajaj Allianz, Tata AIG and Iffco Tokio Marine so far is well under 90 per cent.

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