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Reasons For Less Motor Insurance

The document outlines several challenges facing the motor insurance sector in India. Key challenges include adverse claim experiences leading to higher tariff rates opposed by commercial vehicle owners, a large number of vehicles without valid insurance, changing customer needs seeking more service-based policies that insurers struggle to provide, underinsurance of many vehicles, limited data for pricing policies effectively, lack of technical knowledge among claims processors, unclear policy terms and conditions for many customers, lengthy claims processes, and high premium costs compared to coverage amounts. Customers also generally prefer longer-term motor insurance policies.

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Deepak Kumar
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132 views2 pages

Reasons For Less Motor Insurance

The document outlines several challenges facing the motor insurance sector in India. Key challenges include adverse claim experiences leading to higher tariff rates opposed by commercial vehicle owners, a large number of vehicles without valid insurance, changing customer needs seeking more service-based policies that insurers struggle to provide, underinsurance of many vehicles, limited data for pricing policies effectively, lack of technical knowledge among claims processors, unclear policy terms and conditions for many customers, lengthy claims processes, and high premium costs compared to coverage amounts. Customers also generally prefer longer-term motor insurance policies.

Uploaded by

Deepak Kumar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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REASONS FOR LESS MOTOR INSURANCE

Motor tariff rates

The problem of motor vehicle insurance companies are that they were facing continuously
adverse claim experience through its statutory legal liability section. A large amount of motor
vehicle insurance was taken but commercial vehicles owners have heavy incidence of claims for
several years. The commercial motor vehicles owners were not in the favour of increasing motor
tariff rate and most of the times they oppose this through stikes. Several measures were taken by
various committee to solve the issue related to motor tariff rate but nothing yet to be done.1

Invalid motor insurance-

The another challenge that motor insurance sector facing is invalid motor insurance. Several
vehicles that ply on Indian roads do not carry a valid insurance (reasonable estimates put it
anywhere around 40 % of them) is one that needs to be taken seriously and tackled at the right
places. This alone could be a major factor for the Motor portfolio to bleed year after year.2

Changing customer needs and preferences-

In this scenario non-life insurance companies are witnessing changing customer needs and
preferences in motor insurance policies, which is their largest business segment. Now customers
no longer want plain vanilla insurance policies that just cover their car, truck or two-wheeler, but
are increasingly asking for service based insurance coverage and insurance companies are
lacking in fullfilling this requirement.3

Underinsurance

According to estimates, around 40 per cent cars and 70 per cent two wheelers are underinsured.
The traditional distribution channels have failed to spread the insurance beyond a point. Since
the premium of an insurance policy for a two-wheeler is less than Rs 1,000, agents do not
consider it a lucrative business due to lower commissions.4

Limited data for pricing

The other challenge faced by insurers is that there is not enough data to help them in pricing a
risk. According to a report published in 2012 by the Road Transport Authority, the driver‘s fault
account for a whopping 77.5 % of the total road accidents. Yet the pricing is based more on the

1
Mony.V.S.(2005). New Initiatives In The Insurance Sector: Opportunities And Challenges.VIKALPA.Vol:30.
N:03.p:104.
2
Jawaharlal.U. (2013). Fighting The Evil Forces-Motor Insurance.IRDA Journal. Vol:11.No:1.January.p:15.
3
Syed Falaknaaz.(2013):Trends and challenges in motor insurance. Financial Chronicle.India.
http://www.mydigitalfc.com/insurance/trends-and-challengesmotor-insurance-937
4
Ibid.s.no:3
year of manufacture of the vehicle, engine capacity, price and the zone in which the vehicle is
bought and less on the age, occupation and credit score of the driver and usage of the vehicle.5

Lack of basic technical knowledge

Most of the staff members processing the claims and scrutinizing the survey report do not have
any basic technical knowledge on the structure of vehicles, in the absence of which they blindly
believe whatever is stated in the survey report.6

Terms and conditions

In many cases policyholders are not very clear or do not have proper information’s about their
motor insurance policy terms and conditions. The reason behind it was complicated / confused
policy wordings, especially to the policyholders belonging to the rural area due to illiteracy,
unfamiliar with english language etc.

Lengthy Process

In Indian motor insurance industry the problem that customers are facing in relation to claim
settlement is lengthy process due to legal formalities, mismanagement of the company and
inefficient staff specially in public sector.

High premium charges

Another challenge that policyholders are facing in this time are higher premium charged by the
insurance companies. Customer thinks that they are paying more premium in comparison to the
sum assured amount.

Term

Most of the customers wanted long term motor insurance policy rather taking one year policy
specially in public sector motor insurances companies

5
Ibid.s.no:3
6
Ravindrarao.K. (1989). Future of Motor Insurance In India. Journal of Insurance Institute of India. pp: 1 ,7&10.

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