In case of airlines, there are web-based aggregators such as makemytrip.com or cleartrip.com who obtain quotes from a host of airlines and offer a platform for flyers to get the best deal. Similar on-line intermediaries are likely to help buyers do comparison-shopping for auto insurance.
According to K N Bhandari, chief executive, General Insurance Council — an association of non-life insurance companies, the industry is in favour of healthy price competition and companies are open to providing quotes to such intermediaries. Already dealers for new cars are providing such aggregator service by offering quotes from a host of companies for new car buyers. This is possible because the dealer has floated multiple entities — each of which has a corporate agency relationship with one insurance company.
But so far this aggregator facility has been available only for new car owners as dealers do not see insurance as a core area.
Another reason why aggregators have not come forward is that IRDA regulations require that any entity offering products of multiple companies should have a broking license. This means that the intermediary has to fulfill all conditions -- including setting up a new entity with a minimum capital of Rs 50 lakh. But given that auto accounts for more than 50% of the non-life industry premium, insurance companies are confident that brokers will start looking at the retail segment.
The good news for insurance buyers is that following the removal of price controls, the reaction of players has been to grab as much market share as possible. This has prompted companies to bring down rates across the board. Motor insurance rates, which were ruling at around 3% of the insured value of the car, are down to 2%. “Outside India the lowest rates are around 5% of the car value. Even in neighbouring Pakistan, motor insurance rates are around 5% of the car value” says Bhandari.
To ensure that there is some discipline in the market, the IRDA has said that insurers cannot cancel old tariff governed policies and replace them with new policies. This would mean that for car-owners new products would start becoming available gradually over a 12-month period depending on their date of renewal. But insurers feel that these rates are unsustainable. With the latest cars are being launched in India, even small repairs are expected to result in large claims forcing insurers to start looking at their bottom line. They are therefore intensifying their risk-based pricing approach.