The world of general insurance is changing fast. In the near future, the insurance for your assets (car, home and health) and necessities (travel and education) will be bought, not sold. You, not the agent or the insurance firms, will take the final call on what you want. Product customisation will be the key. Discounts of up to 50% will be available, especially in the case of car insurance. But you will have to cough up more if you have a bad track record. Welcome to the new, competitive world of general insurance.
Apart from the obvious benefits, this revolution will have significant implications for the consumers. Since there will be few standardised products, and prices will differ across policies and companies, you will need to be smart to be able to pick the right cover. This translates into greater awareness about the policy and the insurer, but more importantly, about your own requirements. No longer can you wholly depend on the agent or the intermediary to make this choice for you. Agrees N.K. Kedia, director (marketing), Iffco-Tokio General Insurance: “Finally, the one-size-fits-all policies will be out, which will make consumers more demanding and involved in the products.”
Smart Buying Tips
|Log on to insurance portals such as policybazaar.com and click2insure.com or Websites of insurers to compare premiums, and choose the lowest quote.|
|You can avail of loyalty discounts if you buy your insurance covers from the same insurance company.|
|The scope of the cover is more important than its price. A broker will charge a fee but help you find the best cover with features that suit your needs.|
|To reduce the premium, opt for a minimum deductible amount. If you pay a minimum portion of the total amount in case of a claim, the premium comes down.|
We help you gear up for this new world by offering a blueprint that will help you acquire the best cover—one that secures you well and suits your wallet.
Price Is The Key
When Rajinder Singh, a Delhi-based retired army officer, checked for car insurance premiums on the Internet, he was in for a surprise. “I was amazed by the variation in the premium rates across insurers for the same car model and year of manufacture. After comparing the rates, I opted for a policy that saved me Rs 7,000 on the annual premium,” he reveals. With de-tariffication in January 2007, the era of fixed premiums across similar policies and covers is over. Insurers now jostle to grab business by quoting the lowest possible premium.
S. Narayanamurthy, senior vicepresident, underwriting and product development, Bharti AXA General Insurance, feels that discounts of up to 50% are now a distinct possibility. So, you need to keep your eyes and ears open to bag the best bargain. In the near future, when insurers are allowed to structure their products after the last phase of de-tariffication, pricing will become more dynamic. In fact, premiums may be decided on an individual basis depending on the buyer’s risk profile. The consumer too may be able to indicate the price he is willing to pay, and the insurance firm will structure the policy accordingly.
It is already a reality. For instance, a car insurance policy now comes with add-on covers. These could be in the form of reimbursing daily allowances to finance the cost of a hired vehicle while your car has gone for repairs. Tata-AIG General Insurance offers other covers such as depreciation reimbursement and ‘return to invoice’, which makes up for the difference between the sum received by an owner for his old, damaged vehicle, and the replacement cost for a new, similar model.
Says Gaurav D. Garg, CEO and managing director, Tata-AIG General Insurance: “We have always added more value to products and services. Our add-on covers provide the customers with more choices based on their requirements.” Narayanamurthy says that car premiums are now being worked on the basis of the vehicle’s claim history and the date of manufacture. Therefore, newer cars with less number of claims get higher discounts, and careful drivers pay less. Expect similar products in other areas: home insurance may be bundled with home loans along with add-on covers for costs incurred on repairs and maintenance, and specific body parts may be insured (a singer for her voice and a software engineer against the common carpal tunnel syndrome).
When it comes to travel insurance, many firms now offer separate plans for students, frequent business travellers, even senior citizens. Apart from international travellers, domestic ones can also choose to insure themselves against baggage loss and flight delays. Some insurers have also introduced policies to cover job loss, which help you pay your EMIs for three months in case you lose your job.
Today, one of the best ways to buy insurance is online. This is because insurance portals allow you to compare products and prices offered by different players, and buy the one that suits your needs and pocket. All you have to do is key in your requirements and you will get quotes from several insurance firms. You can then choose the one that suits you. Says Yashish Dahiya, CEO, policybazaar. com, one of the Websites offering these services: “We offer 5,000 quotes a day on our site, which leads to increased referrals and also sales.” His Website has tied up with 41 insurers so that it can offer a wide range as well as the best possible price to consumers.
The sales and distribution channels will undergo more changes in 2009. Soon, you may be able to buy insurance products off the shelf. Future Generali General Insurance plans to build a one-stop insurance mall, much like the specialised malls for other products (telecom, white goods, and electronics). Bharti AXA is toying up with the idea of using tele-sales through Bharti Airtel, which has the largest number of mobile subscribers in India.
If buying will become easier, so will the settling of claims. Already, cashless settlement of health and car insurance claims is a reality. You don’t have to pay first and approach the insurance firm later. Now, the insurance firm pays directly to the hospital or garage. Take the case of Delhi-based Vikas Arora, who had a car accident while in Jaipur. “I was worried if the insurance firm would accept my claim, but the company guided me to a local workshop and I had to pay only Rs 1,500 out of the total bill of Rs 16,000,” he says. In four days, he drove back to Delhi in the same car.
Know You Risk Profile
As free pricing and competition set in, insurance companies will start evaluating individual premiums based on their perception of the buyer’s risk. In case of car insurance, for example, this will result in the claims history being tagged with the car whenever it is sold again. The future premium will be dictated by the number of claims made in the past. The lower the claims, the lower the premium. This will obviously help good drivers who currently pay the same as those who make frequent claims. Such distinctions can also be made on the basis of age and gender.
A word of caution: the cheapest product is not always the best. Says Anuj Gulati, director, ICICI Lombard General Insurance: “Don’t look at the premium alone. Consider the value for money that the product offers in terms of services.” Clearly, a great bargain should never be the sole reason to buy insurance.
|Rajinder Singh, Retired Army Officer, New Delhi|
|Saved Rs 7,000 on car insurance by buying online.|
|“I was amazed to see the variation in the premium rates when I compared them on policybazaar.com. Instead of Rs 21,000 as quoted by an agent, I paid Rs 14,000 as premium for my car. It was a very easy and fast process.”|
|Vikas Arora, Corporate Trainer, New Delhi|
|Rs 16,000 cashless car claim settled while in Jaipur.|
|“I called my insurer after I met with an accident in Jaipur. The company asked me to contact a local garage. The bill of Rs 16,000 was settled cashless. I had to pay only Rs 1,500 for the depreciation of plastic parts.”|
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