Source: GlobalData
The pandemic put the brakes on the overall road vehicle volumes, purchase of new cars, car usage due to work from home, and subsequently diminished the prospects of the auto-mobile industry in the short term. While the end to the pandemic is still unclear, we take a closer look at the auto insurance industry as many consumers have changed significantly. For instance, as public health measures have loosened in the aftermath of the 3rd wave, motorists have increased their driving frequency and even changed their driving behaviour. These reforms have had a significant impact on auto insurance companies.
These challenges are only the tip of the proverbial iceberg as the auto insurance industry finds itself beleaguered:
However, is there a silver lining on the horizon? Let’s take a closer look.
Vehicle premiums could increase from next year:
If the government’s proposal is approved by the necessary parties, vehicle insurance costs could rise starting next year. Third-party auto insurance prices might rise by up to 21%, according to a proposal by the Ministry of Road Transport, making it more expensive than ever to insure your car or two-wheeler. Since the out of the pandemic, two years ago, insurance prices have remained unchanged. The most recent review took place in 2019-20, which could explain why the government is proposing such a large jump. Usually, the Insurance Regulatory and Development Authority of India (IRDAI) adjusts third-party insurance premium prices every year but the pandemic acted as an unforeseen black swan event that led to a temporary hiatus in revisions.
Consider GAP Insurance for new purchases
Due to a scarcity of inventory as a result of supply chain challenges and a computer chip shortage, new vehicles are extremely expensive right now. Presently, the cost of totalled car claims is soaring due to higher new and used car valuations, inflation, and supply chain concerns. If your car is totalled, you can make a collision or comprehensive insurance claim, depending on the cause. The reimbursement for a totalled car is the same as its market value at the time of the accident. That means if you buy a car now at a high price and it’s totalled or stolen later when vehicle values have fallen, you could be in trouble.
EV Insurance rates to come down
Electric vehicles are more popular than ever in India, especially in light of recent geopolitical events that may lead to higher oil & gas prices. Electric vehicles have historically been more expensive to insure vis-a-vis its conventional counterparts due to increased repair expenses for parts and labour prices. According to industry observers, this could change as economies of scale come into the picture with electric vehicles (EVs) garnering significant mainstream adoption in the country. While, there is still significant scope for innovation with EV manufacturing, it is becoming more efficient and easier to repair. Especially with various automobile manufacturers upping the ante for low-cost EVs in India.
-By Lionel Alva
