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In 2024, car insurance in India has evolved with new policy features, affecting both the pricing and coverage options available to vehicle owners. Regulatory updates, increased digitalisation, and the demand for personalised coverage drive this shift.
Understanding these changes can help you make informed decisions when purchasing or renewing your car insurance.
Understanding Car Insurance in India
Car insurance in India typically comes in two main forms: third-party car insurance and comprehensive insurance. Third-party insurance, mandated by law, covers liabilities arising from damages or injuries caused to others. Comprehensive insurance, on the other hand, includes both third-party liability and damages to the insured vehicle due to accidents, theft, natural calamities, and more. This year, insurance companies have introduced several new features to adapt to changing customer needs and the latest regulatory frameworks.
Key Features in New Car Insurance Policies in 2024
1. Usage-Based Insurance (UBI)
- What It Is: Usage-based insurance is a modern approach where premiums are calculated based on how much and how safely you drive. This method uses telematics devices installed in vehicles or mobile apps that monitor driving behaviour.
- Benefits: For those who drive infrequently or have safe driving habits, UBI can significantly reduce premiums.
- Effect on Premiums: UBI can lower premiums for low-mileage drivers, potentially making comprehensive coverage more affordable than before.
2. Pay-As-You-Go Plans
- What It Is: Pay-as-you-go plans allow policyholders to pay for insurance based on their driving frequency, especially beneficial for people who drive seasonally or work remotely.
- Benefits: This plan provides flexibility in insurance payments, particularly for those who don’t use their vehicle regularly.
- Effect on Premiums: Premiums are adjusted based on usage, which can make car insurance more economical for occasional drivers.
3. Zero Depreciation and Engine Protection Add-Ons
- What It Is: Add-ons like zero depreciation cover and engine protection offer enhanced security for critical vehicle parts without deducting depreciation costs.
- Benefits: These add-ons provide extensive coverage by protecting specific components such as the engine, gearbox, and plastic parts.
- Effect on Premiums: While these add-ons increase the premium, they offer substantial savings during claims by covering full repair costs without depreciation deduction.
4. No Claim Bonus (NCB) Retention and Transfer
- What It Is: NCB is a reward given to policyholders for not making claims in a policy year. In 2024, some insurers allow NCB retention even if a claim is filed, under certain conditions.
- Benefits: NCB retention policies incentivise policyholders to drive safely, as it protects their premium discount despite minor claims.
- Effect on Premiums: With NCB retention, premiums remain lower for safe drivers even after small claims, leading to overall premium savings.
5. Electric Vehicle (EV) Insurance Discounts
- What It Is: Given the rising popularity of electric vehicles, insurers now offer special discounts on EV insurance premiums.
- Benefits: These discounts support environmentally conscious choices, lowering the premium for EVs compared to traditional vehicles.
- Effect on Premiums: Premiums are lower for electric vehicles, which aligns with the government’s push towards green energy adoption.
6. Third-Party Premium Adjustments
- What It Is: Third-party car insurance premiums have been revised this year, considering inflation and other economic factors.
- Benefits: This adjustment aims to ensure the sustainability of third-party insurance amidst rising claim costs.
- Effect on Premiums: The revised rates might slightly increase third-party insurance premiums for certain vehicle categories, making it essential for vehicle owners to budget for these changes.
7. Increased Digitalisation and AI-Based Claim Processing
- What It Is: Insurers have adopted artificial intelligence (AI) to streamline claims, offering faster claim settlements, digital documentation, and real-time tracking.
- Benefits: This digitalisation makes the entire insurance process—from purchasing to claim settlement—more transparent and efficient.
- Effect on Premiums: Although digitalisation itself may not directly affect premiums, faster claim processing reduces administrative costs for insurers, possibly impacting premium adjustments in the long run.
8. Flexible Add-Ons for Specific Needs
- What It Is: Insurers now offer customisable add-ons, like roadside assistance, return-to-invoice cover, and key replacement. These options allow users to tailor policies to fit individual needs.
- Benefits: Policyholders get to choose only the coverage they require, potentially lowering unnecessary premium costs.
- Effect on Premiums: By opting only for essential add-ons, policyholders can keep their premiums within their budget while ensuring they have necessary protections.
9. Driver-Based Insurance Premiums
- What It Is: Driver-based insurance considers the experience, age, and driving history of the primary driver, adjusting premiums based on their risk profile.
- Benefits: Safer, more experienced drivers can secure lower premiums, making insurance more personalised.
- Effect on Premiums: This feature benefits careful drivers by offering reduced premiums, rewarding them for their driving history.
10. Anti-Theft Device Discounts
- What It Is: Vehicles equipped with certified anti-theft devices qualify for premium discounts.
- Benefits: The use of anti-theft devices reduces the risk of theft, thus lowering the insurer’s potential liabilities.
- Effect on Premiums: By installing these devices, policyholders can enjoy lower premiums, which incentivises vehicle security.
The Impact of These Features on Overall Premiums
The inclusion of these new features makes car insurance policies in India more versatile and customer-focused in 2024. However, the impact on premiums varies based on several factors:
- Customisation: By allowing customisation through add-ons and flexible options, policyholders can now choose features that align with their requirements, resulting in more tailored and potentially lower premiums.
- Driving Habits: Usage-based and driver-based premiums reward careful and low-mileage drivers, which can help reduce costs for responsible vehicle owners.
- Environmental Considerations: Discounts on EV insurance contribute to cost reductions, supporting a greener future.
- Claims Efficiency: AI-based claims can lower insurers’ administrative costs, which may translate into premium savings or slower rate increases over time.
While some of these features might lead to slight increases in premiums, particularly in cases of third-party policy adjustments or high-end add-ons, the overall effect is a more balanced premium structure. Policyholders who use these features to their advantage can lower their premiums or, at minimum, stabilise costs despite inflationary pressures.
Conclusion
The car insurance landscape in India is adapting to new demands with features that provide enhanced flexibility, digitalisation, and environmental consideration. The introduction of usage-based plans, EV discounts, and driver-focused pricing reflects a shift towards rewarding responsible driving and sustainable choices. Additionally, technology-driven improvements in claim processing and policy management have improved the customer experience and reduced the administrative burden on insurers.
As a result, the overall effect on premiums will depend on individual driving habits, vehicle type, and the level of coverage chosen. For low-mileage and safe drivers, these features can lead to significant premium savings. On the other hand, high-end add-ons may cause slight premium increases, but they provide comprehensive protection that could result in substantial financial savings during claim settlements. By selecting the right combination of features, car owners can enjoy personalised, cost-effective car insurance that meets their needs in 2024.
