Entry-level car owners giving insurance add-on plans a miss

Tags: Insurance

Demand rising constantly among high-end vehicle customers

Demand for car insurance add-ons is yet to pick up in smaller and mid-segment private cars. Various general insurance companies offer add-ons along with standard motor insurance policies to differentiate their product and increase coverage for vehicle.

“Since the policyholders in entry to mid-level segment are price sensitive, demand for motor insurance has not been high. However, demand is constantly rising among high-end vehicle customers,” said Abhay Kumar, vice-president, head of retail business, Iffco Tokio General Insurance.

As per insurance experts, annual premium for a policyholder who choose add-ons goes up by around 20-40 per cent against a vanilla insurance policy. The common add-ons that are available from most insurers include zero depreciation cover, back-to-invoice price, roadside assistance, accommodation expenses and loss of baggage.

Motor insurance tariff rates were de-regularised by the Insurance Regulatory and Development Authority (Irda) in 2007, and since then, insurers had been pricing their product as per their risk analysis. Since most motor insurance policies offer similar coverage, insurers came up with add-ons to differentiate their products.

“In the higher segment of vehicles where the cost exceeds Rs 25-30 lakh, add-ons are quite popular and almost 80-90 per cent people opt for these. The demand from smaller car owners is only around 10-20 per cent,” said Narender Anand, vice-president and product head of general insurance at Bajaj Capital.

As the extent of damage in terms of repair and replacement cost is high in high-end cars, there is a rise in demand for add-ons. While in mid-range cars valued between Rs 8 lakh and Rs 20 lakh, around 40 per cent policyholders are asking for add-ons.

“Based on customer feedback, we have introduced new packages that consist of the most basic and popular add-on covers, which is the depreciation cap and road side assistance,” said Vijay Kumar, head of motor insurance at Bajaj Allianz General Insurance.

Unlike health insurance or life insurance, in motor insurance it is hard for insurance companies to bring product differentiation. With the rising demand for vehicles in the country, motor insurance is also a growing segment for insurance companies.

“Going forward add-ons would be important differentiating factor for insurance companies. Earlier, only private sector insurers were coming up with add-ons, but now, even public sector insurers are providing these options,” said Arvind Laddha, chief executive officer of Vantage Insurance Brokers and Risk Advisors.

sagarsen@mydigitalfc.com

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