Growing Demand And Awareness For Car Insurance In India

A Supreme Court Committee on Road Safety has asked the Insurance Regulatory And Development Authority (IRDAI) to implement a mandatory three-year insurance policy for cars and five-year policy for motorbikes at the time of sale and registration. As per the sources at the Insurance Information Bureau (IIB), only 6.5 to 7 crore vehicles have insurance cover against approximately 18 crore registered vehicles on Indian roads.  Government officials have stated that almost 50 per cent of vehicles plying on Indian roads have no valid insurance and a majority of them are two-wheelers.

The Motor Vehicle Act, 1988 states that insurance of a motor vehicle covering the third party risk is mandatory by law in India. A vehicle should not be used in a public place without having an insurance policy covering third party risks. A Third Party Liability (TPL) means risk cover for bodily injury, death and damage of property of an involved third party.

After the recent amendments made to the Motor Vehicles Act, non-possession of a minimum of Third-Party insurance policy attracts a fine of Rs2,000 for the first offence and Rs4,000 for the second offence. 

The motor insurance industry in India | Growth overview

Motor insurance forms the largest sector of the general insurance industry in India. The car insurance sector is valued at Rs70,000 crore with insurance claims towering at a staggering 1.2 lakh crore nationally. According to a report by Mordor Intelligence; premium from motor insurance in India accounted for approx 39.4per cent of the overall non-life insurance premium in the year 2018. Mentioned in the same report, the car insurance industry has registered a Compound Annual Growth Rate (CAGR) of 11.36 per cent in the study period between 2012-2018.

Car insurers are undaunted despite 2019 crisis

The Indian automotive industry has seen strong growth in recent years. New car sales have increased to 7.01per cent between FY2013 to 2018 peaking at 24.97 million vehicles.  The year 2019 saw a major setback with the advent of the great Indian automobile crisis where car sales dropped to a decade low. However, this crisis, in turn, boosted the second-hand car market which is projecting double-digit growth rate in the past few months.

As per figures released by the IRDAI, general insurance saw a growth of 16.84 per cent compared to 2018. Premium income surged to Rs20,145.46 crore in September 2019 from Rs14,463.60 during the same month in 2018. A major portion of this pie was roped in by motor insurance companies. 

The growing awareness for motor insurance

There has been a paradigm shift with concern to motor insurance in India. The recent amendment in the Motor Vehicle Act with revised penalties against violation of possession of a basic TPL policy has contributed to an increase in the sale of motor insurance policies in India. In the case of two-wheelers, the fine is greater than the cost of insuring a two-wheeler itself which has brought many uninsured vehicles in the insurance ambit.

Data analysts have predicted a rising rate of growth for the Indian car insurance industry in the year 2020. Strong macro-economic factors and a rigid financial ecosystem makes India an incubating hotspot which can boost the car insurance market to new strata.

A revolution is coming

A new future awaits for the motor insurance industry in India. The growing awareness for motor insurance has caused an increase in the percentage of the claims. Ditching the orthodox approach of the past, Insurance companies are now frantically looking for new and technology-backed ways to expedite the claims redressal process.

This has lead to motor insurance companies venturing up with Multi-brand car service centres which claim to offer a seamless experience for car repairs under insurance. What makes ventures like these stand-out is a strong technology backend, a centralised Original Equipment Manufacturer (OEM) and Original Equipment Supplier (OES) spares inventory and adept operational excellence.

Innovative startups are helping India’s insurance industry in improving efficiency through the use of new-age technology. Live updates over WhatsApp is an upcoming feature through which a user can track their car repair status. A dedicated Key Accounts Manager (KAM) monitors the complete car repair journey from the pick-up till the delivery and updates a user from every end.

From authorised to multi-brands

Motor insurance companies love multi-brand centres as they provide OEM-quality repairs at a cost way less than authorised dealerships. Moreover, the “Repair-Over-Replace” policy helps insurance companies keep their loss ratio in check, which is why you can now find cashless claim facility at multi-brand workshops.

The cost factor along with quality assurance is another reason which pulls the average car consumer from authorised dealerships to multi-brand car service centres. In fact, market data suggests that only 35 per cent of all “post-warranty cars” head back to a company authorised service centres. The rest 65 per cent, go to multi-brand car service centres.

The overall growth rate for multi-brand car service networks has been phenomenal. There has been a dramatic increase in popularity and acceptance for Multi-brands, especially among millennials. Data analysts predict a growth jump of the current one per cent to eight per cent by the year 2020 for the multi-brand car service sector in India.

The author is the Vice President, Insurance at GoMechanic