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Last Updated : Sep 24, 2019 04:26 PM IST | Source:

This could be the best time to buy a motor own-damage cover

The motor own-damage premiums have crashed since there is an intense competition among insurers to capture market share

M Saraswathy @maamitalks
Representational Image
Representational Image

This could be the best season to buy a motor own-damage (OD) cover that will protect your vehicle against damages during accidents. General insurance industry sources have told Moneycontrol that there is a crash in the OD cover premiums as the competition has intensified.

This will mean that an OD cover will be almost 20-30 percent cheaper than what it was in 2018. On the other side, the motor third party premiums have increased as a result of the annual price hike, as well as the apex court ruling on new cars, bikes buying a long-term cover.

"The prices have been on a constant decline. While it is good news for customers, this is making business unviable for the companies," said the chief executive of a large private general insurer.


Sources have also said that there is aggressive competition between public sector and private insurers in the motor segment that has made the prices drop. This is similar to the group health business where non-life insurers were undercutting each other to retain corporate clients.

This is amid the insurance regulator (IRDAI) allowing vehicle owners to buy standalone motor OD policies. Earlier, vehicle owners were required to buy motor insurance third party (mandatory cover) and OD from the same insurer.

Since motor OD pricing is not regulated by IRDAI, non-life insurers would earlier fix the price based on the type of vehicle and past claims experience. However, with private sector insurers eating into the market share of PSUs, the competition has intensified.

"Public sector insurers have not been able to offer a consistent service which is why customers are switching to private ones," said the head of sales at a mid-sized private insurer.

On the other hand, public sector general insurers allege that private players have indulged in predatory practices to take away their business.

While, from the public sector, New India Assurance, United India and Oriental Insurance are the major players; in the private sector, the big ones include ICICI Lombard, Bajaj Allianz and SBI General.

The private sector is now inching closer to 60 percent market share in the motor insurance market. Unlike motor TP which is loss-making, motor OD segment is profitable since insurers are able to price it appropriately.

However, underwriting heads at non-life insurers said that, with the prices dropping, this segment could also enter underwriting losses meaning premiums collected are lower than claims paid.

In other segments like fire and marine, IRDAI has asked insurers to assess the risks appropriately before calculating the premium.

The own damage cover offers protection against vehicle repairs, dents, scratches, engine failure, theft and fire.

The Insurance Regulatory and Development Authority of India (IRDAI) has said that insurers will have the option to offer package policies in addition to stand-alone OD and TP policies. However, it clarified that a long-term stand-alone own damage policy would not be permitted.

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First Published on Sep 24, 2019 03:26 pm
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