Drive well, stay safe & pay back loans to save on auto premium
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If you have a bad credit history, reside in a place that is prone to accidents or thefts, or are simply a bad driver, you may soon have to fork out higher motor insurance premiums.
According to sources in the General Insurance Council (GIC), the representative body of the non-life insurers, a more sophisticated and detailed insurance pricing system is being developed independently by each insurer, which will now include many more risk factors that customers are subjected to.
Stepping away from the current pricing practice of 'one size fits all' (based on vehicle type, past claims), the new mechanism is expected to be more accurate and help generate higher revenues for an industry striving to achieve profitability.
For instance, if four people own the same model of a car, under the current system all are charged similar annual premiums. But in the new system, if one is a better driver, falls under a lower risk profile or the vehicle is parked at home for most of the year and has a better credit history, the premium will be lower than others.
"When business grows, naturally claims will also grow. But higher claims are now bleeding the industry. Insurers are independently looking at ways to increase premium prices," a GIC official said. "Though insurers have some details on customers, geographies and vehicles, the effort now is to get minute details," another official said.
The move to raise the pricing mechanism to global standards comes following the huge losses suffered by the industry mainly on account of the higher claims ratio in the motor insurance segment, which was 94.9% in 2011-12.
GIC officials added that to address concerns relating to invasion of privacy, insurers will specify to policyholders that if one wants their premium to be better priced, then one has to provide more details.
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