THERE are various types of insurance available today and each one of them is governed by specific factors that determine the premium for the policy.
One area in the non-life insurance sector is motor insurance and hence there has to be a closer look at the factors that affect this particular area. This will help in better understanding of the changes witnessed here and recently there was a rise in the premium level for third party insurance in the motor insurance segment.
Here are some details that will help in the process:
Overall losses: The motor insurance segment consists of third party insurance, which is compulsory and comprehensive cover.
This segment, as a whole, is running into losses in India. This means that there is a position whereby the claims that are paid for various accidents are more than the premium that is received from the policyholders.
This is especially true for large vehicles like buses and trucks. This becomes one of the reasons why the premium on the policy rises for various segments.
Accidents: Apart from the overall position there is also the question of the past record of the driver and the number of accidents that they have registered with the vehicle. If this is high then it is natural that the premium that the individual will pay on the policy will be higher.
There is a revision that is witnessed on a regular basis and since these policies are of duration of one year it is likely that the rise in the premium will impact the individual at the time of renewal.
Use of vehicle: There is also a difference in the manner in which the premiums are structured especially when it comes to the question of the nature of the vehicle and who is actually going to drive the vehicle.
For example, if there is a vehicle that is being used for commercial purposes like being lent out on hire, then the premium will be higher. A self owned vehicle might have a lower premium but once this is set then specific factors that deal with the increasing amount on an annual basis will take over.
Age: There is also the question of the age of the vehicle because as the vehicle gets older there is a change in the amount of the insurance that is available and this is known as the insured declared value. This corrects on account of the change in the value of the car and hence the individual will find that the amount of the insurance cover is also reducing year after year.
This factor has to be considered by the individual when they are making plans for the purpose of replacement of the car as well as expecting some amounts that will come in from the insurance company in case of any damage to the car.
Expectation: The individual has to expect that over a period of time there will be a rise in the insurance rates that they will pay for their car insurance. The other thing is that as time passes there will also be a lot of individual features that will go into determining the exact amount of the premium that will be charged.
The motor insurance segment in the country is still evolving and hence the effects will be visible over a period of time and the individual should be ready for the changes.
