Many companies have started giving huge discounts on car insurance to retain renewals if the customer gives PDCs. SHAlINI SAKSENA speaks to industry experts to tell you that by doing so, not only does the owner get benefits, he also saves on the last-minute hurry
When 33-year-old Suman lata got a call from an insurance company last week, that they were offering a 50 per cent discount plus the benefit of no-claim bonus, she was not sure whether she should go for this offer. Of course, the person at the other end of the line said that the payment has to be made before May 31, 2013, otherwise the percentage of discount will go down. Usually such offers always have a hidden agenda and in the end it is the customer who ends up paying a heavy price.
An advertisement on TV also says how many companies are offering discounts on renewals and that one must compare the various offers rather than sticking to one company. Industry experts tell you that the reason why companies are doing this is because they want to retain their renewals. What should people like Suman late do in such a scenarioIJ What’s the catch and why are insurance companies making these offersIJ
“When a customer pays post dated cheque (PDC) the probability of the customer moving to other players reduces to great extent. The PDC also gives insurance companies assurance of business placed with them,” Niraj Jain, CEO and principal officer with insurancemall.in a Mumbai-based company says adding that a PDC may help customer not only to get some instant discounts but it will also save the last minute renewal hurry. However, customer also run risk of missing any existing offers in virtue of small instant discount.
Agrees Yashish Dahiya founder and CEO PolicyBazaar.com. “Competition and entry of new players are the prime reasons for insurers to offer discounts on car insurance. With an aspiration to capture large chunks of the market share, insurers are becoming more aggressive on pricing and internally increase efficiency. In this respect, the online space is looking to becoming more relevant as it involves virtually no paperwork or the physical need of an agent,” Dahiya explains.
But one has to understand that while companies like Bharti Axa Car Insurance that is offering a 50 per cent discount and ICICI offering around 30 per cent discount, the percentage of rebate that a company offers greatly depends on the type of car one has. In other words, if a person has a Santro, the amount of deduction offered by an insurance company on it may be different in case he owned a Honda City.
“Even though there are many insurance companies which are offering big discounts, the remission does vary from vehicle to vehicle. The only rider in such cases, where 50 per cent discount is given is that there can be higher deductibles and less coverage when it comes to third party insurance” Jain tells you.
Though there isn’t an ulterior motive involves as such, though its advisable for consumers to be cautious about sharing their details while purchasing car insurance. “Cases may occur where an agent offers additional discounts by putting in the wrong details. For instance, in case of companies offering discounts on the basis of age, the agent misquotes your age leading to your claim being rejected,” Dahiya cautions.
So, how does the entire system of giving such huge discounts workIJ “An overall discount on car insurance is based on various factors including loss ratio and claim frequency. Discounts are calculated based on the data collected from each Regional Transport Office or zone and for every car on the roads. This is the reason why it’s possible for a specific car model to not have the same discount from an insurer across India. In addition to these, discounts are also being offered based on parameters like age and profession. An unique initiative now has companies basing their discounts by analysing people’s driving skills. Hence, for example, if a person is in age group 45-60, companies offer discount up to 10 per cent as the chances of a person causing accident in this age group is less,” Dahiya tells you.
For now, there are no additional benefits being offered by leading insurers while renewing the policy. This is inclusive of there being cases where no claims have been made. The best option for a consumer is to make an informed decision on the foundation of his requirement, based on a comparison of the various options available from leading insurers.
“Hence, it’s important that the owner whether purchasing a new policy or renewing an old one, it’s crucial to understand all aspects of your car insurance policy including the various discounts on offer. Many a times it may happen that an agent sells you an affordable policy which compromises on its features,” Dahiya advises.
Another thing to keep in mind is to check for additional add-on benefits available with most insurers that can help enhance the coverage without significantly increasing the premium.