That means, for almost the same cover, by every passing year, you have been paying more.
Irrespective of how much you earn, you won’t mind saving extra cash. So, it’s natural to ask the following question:
“I’ve got car insurance, am a law abiding sensible driver, made no claims, I maintain my car, take care of the dos and don’ts, then why is my premium still going up?”
Well, you are not the only one asking this question. Most car owners face a similar tricky situation.
The answer to this question can help you save some money and also explain how the Indian car insurance ecosystem works.
Let’s understand how car insurance premium is decided by the insurance companies, what makes your premium go up and the steps to save more from your hard earned money.
Car Insurance Premium: How is it decided?
The car insurance premium differs from car to car, yet, have you ever wondered how insurance companies reach a specific figure? Let’s have a look!
- For Mandatory Third-Party Insurance Cover: The Insurance Regulatory and Development Authority of India decides premiums when it comes to the third-party insurance. Your car’s engine cubic capacity (cc) is taken into account and the premium changes every year.
- For Comprehensive Policy Cover: Insurance companies have a larger say with regards to comprehensive policies. Such policies cover your car’s own-damage. As all vehicles may differ from each other on many counts, various factors are taken into account while calculating the premium which could vary from one insurer to another.
Car Insurance Premium: Deciding factors for Insurance Companies
- The Insured declared value of your car.
- Fuel type- petrol, diesel, CNG or LPG.
- Age, the model, make of your car.
- The engine capacity.
- Geographical location.
- The recorded history of previous insurance claims.
- Any No Claims Bonus.
- Any Anti-theft device installed.
Car Insurance Premium Going Up: The Reasons
Analyzing the reasons for an increase in your car insurance premium can help you negotiate the prices and get an insurance company with more cost-effective options.
Below are some reasons:
- Imprecise IDV: Your insured declared value is decided by evaluation and manufacturer’s listed selling price. In the case of comprehensive insurance, many customers opt for higher IDVs which impact own-damage premiums and increase the overall insurance premiums. For third party covers, the IDV does not affect the insurance premium, and with a lower IDV, the premium goes down.
- Add-ons: Some customers prefer insurance packages which provide favorable covers with great add-ons. For example, while owning a luxury car, you might be looking for comprehensive coverage or a customized insurance policy. Hence, your premium could go up.
- Voluntary Deductible Amount: It is the amount, a part of an insurance claim that you choose to pay from your pocket before raising it to the insurance company. Going for a higher VD could result in a lower premium. To avoid paying more, many customers opt for lower deductibles, and it leads to an increase in the premium.
- Residence & Driving Location: As compared to small towns or suburban areas, a higher ratio of cars, risk of accidents, theft and other damages could result in an increased insurance premium for people living in metropolitans.
- Loyalty: Insurance providers use techniques such as ‘price optimization’ for their regular customers to track their habits. Such procedures give them a fair understanding of your chances of changing insurer. After knowing the probability of your movement towards some other company, you are offered an attractive 10% loyalty discount only after an increase of 20-25% in your premium. This arrangement increases your premium.
- Insurance Representatives: The insurance representative assesses the risk of insuring your car. If the risk perceived by him through his subjective analysis is on a higher side, it could lead to a higher premium. The individual interpretations could play a key role. A scratch on your car could be interpreted as a sign of careless driving by one representative; however, it could well be described as a minor imperfection considering the overall well-maintained condition of the vehicle by the other representative.
- One-Year-Old Car Warranties: Some of the manufacturer’s warranties only last up to 6 months. It could result in an expense for the insurance company in case of a claim. Therefore, they might increase the premium to cover such scenarios.
- Claim Trends: If your insurance company experiences a rise in the number of claims, they may, as a pre-emptive step, increase premiums for all customers.
- Credit Scores: Some companies consider your credit ratings while deciding insurance premiums. A less than pleasant credit score could lead to a higher premium.
- Company’s Profitability: Insurance companies have commercial goals, and one of them is to make profits. When a company is experiencing losses beyond a manageable limit; it might decide to increase its car insurance premiums for all customers to meet the bottom line.
Steps to Save Money
You may do some research before buying or renewing your policy. Also, you can use car insurance calculators, independent brokers and quotes from multiple insurance providers. In addition to these steps, you can explore various insurance saving schemes and ways to reduce your premium amount. With Quickinsure, you can compare and buy affordable car insurance. Get your Instant Quote and Online Policy, Now!