Auto stress to impact motor insurance

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Explaining the scenario, Sajja Praveen Chowdary, Head of Motor Insurance at Policy Bazaar.com told Telangana Today, "Premium of insurance companies is going to be affected in the current year. Premium for the new vehicles (in the first year of purchase) account for the bulk of the premium, as the amount in the following years keeps getting reduced over its lifecycle. Since new vehicle sales are coming down, there is going to be a significant impact on premium and their collection."

Dealers and insurers are severely impacted by the dip in sales, so far. The impact on motor insurance has been happening since January this year. "However, with the taxation measures and new norms being implemented by the government, things may start improving from the current or the following quarter," notes Chowdary.

Online impact

From the Policy Bazaar perspective, which primarily deals with renewal of motor insurance online, Chowdary says, with push factors such as the Motor Vehicles Act 2019, the growth in the current fiscal will continue to be around 80 per cent over the previous. Online platforms ensure there is no lapse in insurance renewals and that's why the business is unaffected here.

"Due to the Motor Vehicles Act 2019, Policy Bazaar's two-wheeler insurance numbers in September would have gone up by 3-4 times compared to August. Insurance companies are also seeing two-fold growth during the period. From the car's perspective, while the insurance companies will see 25 per cent growth during the comparative period (September vs August), our numbers will go up by 2x. However, the number of uninsured two-wheelers is very high in India at 70 per cent, with only 4.5 crore insured out of the total 15 crore vehicles on the roads. With the Motor Vehicles Act, this gap will start reducing. From the estimated 37 lakh vehicles getting insured every month, we may see this number touching one crore from September onwards," he informed.

This fiscal, about 2.3 crore private cars are expected to be insured in the country, out of which about 24-25 lakh insurance policies will be online (11-12 per cent). Out of these online policies, 17-18 lakh could be done through Policy Bazaar and the rest by the brokers, other online platforms and company websites. Policy Bazaar today accounts for about seven per cent of the total private car insurance market in India and 60-70 per cent of the online private car insurance market. Claim rate in car insurance in general had been around 15-18 per cent. Roughly 34 lakh claims happen across India, every year.

In the two-wheeler space, roughly about 5.2 crore vehicles will be insured this fiscal, out of which Policy Bazaar expects to do about 50 lakh vehicle insurance policies, accounting for roughly 9.5-10 per cent of the country's market. Chowdary informed, "Policy Bazaar today accounts for roughly 10 per cent of the overall insured market in the country. Delhi NCR is the largest market for us, followed by Bengaluru and Mumbai-Thane region. Pune is a large market for two-wheelers. Chennai, Hyderabad and Kolkata are the other top markets for motor insurance. Hyderabad accounts for over two per cent of the national motor insurance market."

Commercial vehicles space is slowly picking up in India. Policy Bazaar is making about 1,000 taxi policies a month, which was almost zero a year ago. Also, electric vehicles space is in a nascent stage as charging infrastructure is still under creation, and is yet to evolve as a key segment from the motor insurance perspective, he observes.

Stringent norms

Chowdary says that it is essential that the law enforcement should happen in semi-urban and rural areas as well, rather than concentrating on urban regions. Severe penalties should be imposed on all critical violations of drivers, which impact public life.

The Insurance Regulatory and Development Authority of India (IRDAI) is planning to link vehicle insurance premium to traffic violations, which should see some impact next year. Pilot runs are expected to begin shortly.

Source: Telangana Today