Hiking vehicle, health insurance premium rate could blight further insurance awareness and penetration
The two-wheeler apathy, as it were, has in fact triggered an idea among insurers---offer insurance for 2-3 years instead of the standard one year insurance.
Statistics are revealing. The insurance claim ratio is only 6-7 percent for two-wheelers whereas it is 20-30 percent for cars. The inference is two-wheelers do not cause too many third party damages as cars. And born of this confidence, insurance awareness is very low among two-wheeler owners many of whom do not renew their vehicle insurance after the first premium secure in the smug knowledge that no misfortune is going to befall even though the law obliges them as well to take third party cover mandatorily. 75 percent of the two-wheelers on road are uninsured.
The two-wheeler apathy, as it were, has in fact triggered an idea among insurers---offer insurance for 2-3 years instead of the standard one year insurance. A multi-year policy works out cheaper for the insured. As it is, it is not available for cars. The insurance industry as a whole should ponder why the concept of multi-year premium cannot be extended across the board.
It is not only the two-wheeler owners who show a marked disinclination towards insurance. There is a general sense of apathy towards insurance with insurance penetration on an average being just 6 percent of the population.
The IRDA permission to hike the insurance premium for two-wheelers, cars and health come 1st April 2017 by a maximum of 5 percent vis-à-vis the existing rates couldn’t have come at a more inappropriate time given the insurance resistance and the recent hefty hike in third party premium rates---50 percent hike in vehicle insurance premium also taking effect from 1st April 2017 even though the hike spares small cars in so far as third party insurance is concerned. This could be the proverbial last straw on the camel’s back.
The hike appears outrageous in the context of the rational offered by the insurance regulator IRDA---to facilitate payment of reward to intermediaries and agents. IRDA had recently cleared decks for payment of rewards in addition to commission to these persons---20 percent of the first year premium for agents and 40 percent of the first year premium for intermediaries. While nobody grudges rewards to agents and intermediaries, it should not be at the expense of the policyholders or the insured. The IRDA has somehow deemed it necessary that the extra burden on this account should be passed on to the insured. The truth is if an insurer wants to attract more intermediaries and agents, he should be prepared to loosen his own purse strings instead of following the pass-through principle.
Third party insurance has indeed been the nightmare of insurers with many of them losing out on this score alone in so far as vehicle insurance is concerned. But the solution did not lay in the steep hike of 50 percent vis-à-vis the existing rates. The government has already done well to stem the rising tide of road accidents with a stiff hike in penalty for reckless driving in particular and road indiscipline in general. The insurers on their part could have done their bit instead of hiking the premium after crying on the shoulders of the IRDA----hiking the no-claim bonus for the disciplined drivers who have not incurred third party claims. And this bonus must go up steeply.
Likewise health insurers too can do their bit to keep their claim settlements low---fostering health consciousness among the insured. Some of the enlightened insurers provide the insured with exercise equipments and paraphernalia like treadmill at their homes secure in the knowledge that the entire family would exercise thus warding off lifestyle diseases at least. Prevention is better than cure, goes the cliché. One might well add prevention is better than settlement as far as insurers are concerned.
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