Insuring your car? Get your eyes checked and your education certificates in order. With tariffs open to free pricing, general insurance companies have started building a database to capture this and other data that will be linked to premiums over the next two years.
To start with, the companies are building a database for commercial vehicle drivers because they tend to put in more claims.
"We will focus on minute details such as the education of the driver, his experience and the premium will depend on these factors," confirmed National Insurance Chairman and Managing Director V Ramasaamy, adding, "Creating a database is a huge exercise and we have to cover everything."
United India Insurance Chairman and Managing Director G Srinivasan said insurers are trying to put in place a data-sharing mechanism and could tie up with regional transporters to improve the statistics at their disposal.
Profiling all drivers may take a while but insurers have already started linking the annual premium to the details of the car ever since insurance companies were given the freedom to fix premium rates. These rates used to be regulated by the Tariff Advisory Committee.
Insurers are paying special attention to the motor insurance business because it accounts for 45 to 50 per cent of their premium income and losses exceed the premium collected.
Although the mandatory component of third-party motor insurance — which is still regulated — is the bigger contributor to losses, companies are trying to limit their losses through a differential premium structure in the own damage segment. Own damage refers to claims related to the vehicle in case of accidents.
“The premium rate could depend on an insurer’s experience with claims, the traffic in the particular area and road and other geographical conditions. Claims are high in Delhi where the chances of accident and theft are higher. So, a car in Delhi is charged more than one in Kolkata where the cost of maintenance is lower,” said Oriental Insurance Chairman and Managing Director M Ramadoss.
“The claims experience has seen variations with respect to certain geographies,” confirmed Ajay Bimbhet, managing director, Royal Sundaram Alliance Insurance. There are city-wise differentials too. For instance, the premium in Chennai is less than Bangalore.
The vehicle is one of the most critical factors in deciding the premium. For instance, an Indica owner has to pay a higher premium since a large number of these models are used as taxis.
“The Mercedes is a dream vehicle for us as the frequency of claims is very low. The impact may be high so per claim amount is high,” ICICI Lombard Executive Director Vishakha Mulye added.
The colour also determines the premium for some companies. Owners of cars painted a darker shade will have to pay more. "There is no statistical correlation but studies in the West shows that the younger generation prefers flashy colours and the severity of accidents is higher for them," an insurance company executive said.
