Mumbai motorists to lose no-claim bonus

Motorists affected by the Mumbai floods will not only end up sharing the cost of repairs to their cars, but adding to their woes, they will have to pay a higher insurance premium on renewal of motor policies. This is because motorists having put in a claim, will lose no-claim bonus.

No claim bonus is a discount on premium a motorist pays when renewing his policy, provided he/she has not filed any claim during the year. An insured becomes entitled to no claim bonus only at the renewal of a policy after the expiry of the full duration of 12 months. "For motorists, the no-claim bonus will not be applicable on own damage claim. This means the premium rates during the following year will be higher," said Antony Jacob, CEO, Royal Sundaram General Insurance Company.

For instance, the owner of a Rs 5-lakh Santro would pay an insurance premium of Rs 16,135 in the first year. Had there been no claim on the policy, the motorist would have paid a reduced premium of Rs 15,003 on renewal. The reduction follows the depreciation method adopted by insurers.

However, as there has been a claim on the car on account of the floods, the individual would have to pay Rs 13,289 instead as he cannot claim a no claim bonus. The amount paid on renewal of the insurance policy is based on the depreciated value of the Santro at Rs 4.25 lakh.