The Insurance Regulatory and Development Authority of India (Irdai) on Monday released business figures which indicate a substantial growth in the premium income underwritten by general insurance companies in September. Premium income rose to ₹20, 145.46 crores in September from ₹14,463.60 during the same time last year. Overall, general insurers witnessed a growth of 16.84% compared to last year. Major chunk of general insurers' revenue is drawn from the sale of motor insurance policies. However, passenger vehicle sale continued to disappoint with a plunge by almost 24% in September, according to data released by the Society of Indian Automobile Manufacturers (SIAM). If the purchase of new vehicles is going down, what’s really fuelling the sale of motor insurance policies?
General insurance companies seem to be enjoying the spike in the sale of motor insurance policies. After the amendments to the Motor Vehicles Act, not having a third-party motor insurance attracts a fine of ₹2,000 for the first offence and a fine of ₹4,000 for the second offence. The high penalty is contributing to the increasing sale of motor insurance at a time when the automobile industry is struggling. “August to September, the sale of motor insurance saw a significant rise because there’s a high penalty now. The penalty is actually higher than the cost of insuring a two wheeler so this has brought a large number of uninsured vehicles within the insurance net. Own damage and third-party insurance, both have seen equal boost," said Anik Jain, co-founder and chief executive officer, Symbo Insurance. Jain said insurers haven’t taken a hit due to drop in automobile sale only because older vehicles have now come under the ambit of mandatory insurance. Abhishek Bondia, principal officer and managing director, Securenow.in said this could be a one-time high because motor insurance is bought for three and five years so the premium numbers may not continue to remain this strong a year from now.
Why buy a motor insurance?
Other than the fact that law requires all vehicle owners to have a third-party motor insurance, it’s important to understand the benefits of the policy. A third-party liability cover is the basic form of motor insurance or car insurance. This is a mandatory cover that you need before you can take your car out of the showroom. It covers you in case the insured vehicle causes damage to any person or property of a third party. In addition to this, a comprehensive car insurance policy also covers own damage (OD) that insures your vehicle against theft or damage, and passenger cover that insures the lives of the passengers.