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10 smart ways to lower your auto insurance bill - Economic times

05 November, 2009


Unlike the other types of insurance, auto insurance is a mandatory legal requirement and, unfortunately, one that can be pricey too. However, while there is no escape from auto insurance for any vehicle owner, some efforts can at least be made to save on the insurance premium. The good news is that the criteria for premium rating parameters has changed beyond the four parameters prevalent earlier, viz. geographical zone, engine capacity, price, and age of the vehicle. Now in a de-tariffed era, several new parameters are being considered to determine the premium rates thus providing various ways to lower one's insurance bill. One, for instance, can save on the premium just by giving proper information to the insurer. "We always inform our customers to give as much information as possible in order to get the best rates as now there are several parameters being considered for arriving at the premium for your vehicle. The customers can, in fact, lower their premium by 10%-30% simply by giving correct information," says Vijay Kumar, head - motor insurance, Bajaj Allianz General Insurance.

Here we take a look at 10 things which may help lower the motor insurance premium:

1. Make and model of the car

Each make and model has its own claim record and the insurer prices the vehicle based on its claim experience. Some models may be more claim-prone because of their structure or usage, and the premium will factor in all these facets."The discounts depend on the past performance of the make/model in the books of the insurer. For a make/model with favourable loss ratio, the discounts offered would be higher than that of makes/models that frequently meet with accidents. The incidence of accidents depends on the location and attributes of the driver as well. Some make/models have prohibitive repair costs. Discounts may even depend on repair cost charged on certain make/models," says Ajay Bimbhet, managing director of Royal Sundaram Alliance Insurance Company Ltd.

2. Driver's gender

Gender of the driver can also help lower the motor insurance premium. However, whether male drivers would get more discount or female drivers, depends on the policy of the insurers. Some insurers like Bajaj Allianz, for instance, consider female drivers better than male drivers, and therefore give them some discounts too. A handful of other insurers, however, give discounts to male drivers. However, this practice is more prevalent in the west, and is yet to catch up in India. "This practice is not yet prevalent in India and the reason is lack of data. In general practice, there is a constant analysis of data and trends on which the renewal strategy is based. The lack of sufficient gender-based data means that we cannot discriminate on the basis of gender when calculating the premium. In the west, insurers are permitted to use age and gender as a legitimate method to calculate premiums and male motorists pay considerably more premium in their driving lifetime than female motorists," says Bimbhet

3. City where the vehicle would be driven

The city where the vehicle would be driven is also taken into consideration now. "From the earlier two zones, now cities and towns where the vehicle is plied or registered is taken into consideration," says Vijay Kumar of Bajaj Allianz General Insurance. Ajay Bimbhet of Royal Sundaram Alliance Insurance says they are doing location-based claims analysis and the premium is calculated accordingly."Claims experience is impacted by the location due to a number of factors such as congestion or high density of vehicles, high incidents of theft, rough terrain etc. The location is important for deciding on the discount to be offered. In congested cities with bumper-to-bumper traffic, the chances of smaller claims for scratches and dents are more whereas for a highway-driven vehicle, the chances of the vehicle meeting with a major accident is comparatively higher," he says.

4. Profession of the driver

The occupation of the customer, to a large extent, determines the usage of the vehicle.
For instance, an office goer will use the vehicle only to commute between office and home most of the time, whereas a person in the retail trade will use it more extensively plying across the length and breadth of the city. No wonder, one's profession is also taken into consideration while determining the motor insurance premium. "Now due weightage is given to profession which can significantly lower the premium," says Kumar.

5. No Claim Bonus (NCB)

Premium due for renewal is discounted if there was no claim preferred during the currency of the expiring policy. This discount is allowed as a percentage on the 'own damage premium' and the same is increased every year to the next slab if a claim for damage to the vehicle is not preferred. This discount is known as 'no claim bonus (discount)'. "This discount goes up to 50% and the discount earned stays with the policy holder even if the vehicle is sold or if the customer wants to get the same transferred to a similar vehicle owned by him/her. An NCB earned can also be kept in abeyance and utilized on a car bought at a later date. It is, however, important that the customer renews a policy in time as the NCB lapses in case of delayed renewal (break in insurance beyond a stipulated time period)," says Bimbhet. "NCB, therefore, is an important parameter and needs to be disclosed with necessary proof or any wrong information might affect the claim," says Kumar.

6. Voluntary Deductibles

If the customer so desires, he/she can opt out of small claims for minor damages. For this, a voluntary deductible discount is offered and the discounts can go up to 35% of the premium for vehicle damage. The customer, on preferring this cover, voluntarily agrees to bear the stipulated amount of claim and the insurance company will pay a claim only for the damages in excess of this limit of voluntary deductible. You can save on the premium this way too.

7. Safety features

Installing an anti-theft device or other safety features reduces the risk perception of the vehicle in the eyes of the insurer and, therefore, attracts a discount. It is, however, essential to fit an approved make to claim the discount. "While insuring your vehicle, you should try to provide full information about the vehicle, including its safety features like anti-theft device, air bag, etc. This is because providing details about the safety features can attract 2-5% of discount in premium," informs Kumar.

8. Automobile association member

If the customer is member of any designated automobile association, he/she can avail a discount on his/her `Own Damage' premium (applicable for private car and motorized two wheeler policies). "A discount of 5% is given on the own damage premium, subject to a maximum of Rs 200/- for a private car and Rs 50/- for a two-wheeler" says Bimbhet.

9. Concession for laid-up vehicles

If the vehicle is garaged or is out of use for some period (minimum of two months), the existing policy scope can be restricted for parking risks and the customer can avail a concession during renewal of the policy either by way of extending the period after expiry or a credit to the renewal premium. However, intimation to the insurance company is essential.

10. Buy/renew online

Some insurers, including Royal Sundaram and Bajaj Allianz, offer a higher discount when you buy or renew a private car online.
This is because when a customer transacts online with the insurer instead of going through an intermediary, the insurance company has a considerable saving on processing and distribution costs which are passed on the customers. Kumar suggests to always fill the proposal form clearly and provide as much as information as possible. "Since these parameters are always being fine-tuned and new ones added, it is better to provide all the information possible and you may never know which parameter can help in lowering the premium," he says.

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