Go for the right cover drive
A new car buyer has a plethora of options available in terms of insurance; choosing the apt one is quite a task
Buying a new car is a major decision in the life of an individual. He/she gets the feeling of having made a wise decision after the deal. Now comes the crucial decision on insuring the vehicle. There are too many confusing and enticing options.
Earlier, the option was to approach an insurance company’s office or leave the decision to the dealer who is bound to have an alliance with an insurance company (acting as an agent for commission), to obtain a policy. But today, the customer has umpteen options as listed below, with pros and cons discussed.
The first option is where the dealer issues the policy as an MISP (Motor Insurance Service Provider) — the dealer probably puts in more effort for selling insurance than the car itself.
The dealer gets a commission and an incentive for selling the policies. Some dealers even force buyers to take insurance from them under the pretext that in the event of a claim, they will have a problem and cannot get cashless claim settlement.
There is nothing wrong in insuring the car with dealers who are authorised MISPs if the premium quoted is competitive and the service satisfactory.
If there is any accumulated no-claim discount on your old car (a maximum of up to 50%), it can be transferred to the new car policy thereby leading to a substantial reduction in premium outgo. You should inform the dealer of the discount to your credit with proof. The policy is also issued across the counter as most companies have tie-ups with the dealers.
With certain dealers, the premium charged is also more as the discount allowed on the own damage portion is limited whereas in the open market, it goes even beyond 70%.
The second option available to the buyer is through brokers of authorised dealers — here again, the policy is issued by the dealer as an MISP through the broker intermediary. Major auto manufacturers have their own subsidiary broking companies to insure the vehicles sold through their dealer network and earn a commission of about 20%. A major auto brand broker controls more than ₹6,000 crore of insurance premium a year. Certain brokers limit the discount on premium to 30% and the car buyer ends up paying more premium whereas in the open market, discounts of up to 70% are offered. The mandatory third-party liability premium is decided by regulator IRDAI.
These brokers also force the companies in their tie-ups to limit the premium discount to 30% in their software so that nobody can go to other channels and get the policy at a cheaper price. It amounts to preventing customers from benefiting from open market competition. The customers can decide about placing the insurance via this route if they are convinced of the service rendered and premium advantage.
Three, buyers can obtain a policy directly from insurance firms or through general insurance agents — most of us may be dealing with offices of insurance companies/agents for the insurance of our two/four-wheelers, health insurance and other such policies. One can ask for a new car policy with maximum discount from insurers as they compete in offering maximum discount to underwrite more of private car insurance. If you have an old car with accumulated no claim discount (NCB/NCD), the same can be transferred to the new policy after paying back the no-claim discount availed in the policy of the old car. Insurance can be taken through the IRDAI-approved general insurance agents also as the premium cost does not rise even if it is insured through an intermediary. But let it be through a trusted agent as there are a few cases of fake policies issued by some agents authorised to use the company’s portal.
There is a built-in personal accident cover for ₹15 lakh for the owner-driver in the event of death or permanent disability due to accident involving the insured vehicle. Make nomination of beneficiary in the policy for easy transfer of benefit in case of such an eventuality.
One can also opt for certain add-on benefits to the policy on payment of additional premium. a) Option of nil depreciation policy (also called Bumper-to-Bumper) to avoid deduction on account of depreciation in the event of accident damage repair.
b) Engine protection cover to protect the replacement expenses of internal parts of the engine, gearbox, transmission and differential assembly arising as a consequence of an accident or flooding involving the insured vehicle. (Under a regular policy, insurance companies deny the liability stating that the damage to the engine when moved by the owner is a consequential loss.)
c) Cost of key replacement in case of loss
d) Return to invoice cover is an add-on offered in a comprehensive car insurance plan for new cars, or those less than five years old. This cover allows the insured customer to receive full compensation, i.e. the last complete invoice value of their car, in case it has been stolen or damaged beyond repair.
The fourth option for buyers is through web aggregators or directly through insurers’ customer portals — the tech-savvy, younger generation is used to e–commerce and is more comfortable online. This generation gets a thrill in finding attractive rates and finalising the insurance cover on the Net.
However, while taking a policy, verify the credentials of the web aggregator/insurance company behind the promise or the contract. It is advisable to go through the direct portals of the IRDAI-approved general insurance companies. A word of caution though: be careful while taking policies through web aggregators as a few cases of fraud and issue of bogus policies have been reported.
Check the arrangements for settlement of claim in the event of an accident. Most firms settle claim directly with the insured.
Find out whether they can settle directly with the workshop by any arrangement. Even in the case of direct settlement with the dealer, please verify the amount and the extent of damage claimed by the dealer as certain unscrupulous service centres might make a claim for inflated amounts without the knowledge of the insured, affecting the renewal of the policy and premium loading.
(The author retired as a general manager of a nationalised insurance company)
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