More auto insurance sales to happen via net

MUMBAI: Following liberalisation, buying auto insurance may get a lot similar to buying airline tickets. In a couple of years, a significant share of auto insurance sales is likely to take place through the internet.

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.

Mexican auto insurance: What you need to know

By GEOFF HILL, Bajabound.com

As the Baja real estate market grows at a frenetic pace, the number of Americans driving south of the border is increasing as well. Whether you are driving down to Baja for business or pleasure, it is important to buy auto insurance for your trip across the border. The following Q&A examines some of the most common issues regarding Mexican auto insurance.

My U.S. auto insurance provider covers me 50 miles into Mexico, so why do I need to buy Mexican auto insurance for a short trip across the border? This question addresses one of the most common misconceptions about taking a car into Mexico. Some U.S. insurance companies provide coverage a short distance across the border, but only for physical damage and theft. Liability coverage from U.S. insurance companies is simply not recognized by the authorities in Mexico. If you are found to be at fault in an accident you will have to pay for damages to the other vehicle(s) on the spot. However, having a Mexican auto insurance policy would provide the necessary "proof of financial responsibility" and pay for damages to third parties in this situation.

How are Mexican auto insurance claims settled? The way claims are settled really depends upon the Mexican insurance underwriter you buy the policy from. We recommend buying a policy from an underwriter who settles claims in U.S. dollars and who will allow you to get your car repaired here in the United States. Otherwise you may have to leave your car in Mexico to get repaired, or take a settlement based upon Mexican repair rates, which will only cover a fraction of the cost to get it fixed by your preferred body shop at home.

Do Mexican auto insurance policies provide roadside assistance or legal aid? Once again, the services included are dependent upon who is underwriting the policy. Some underwriters include roadside assistance and legal aid as standard features, while others sell it at an additional cost. Regardless, it is highly recommended to have both included in your policy.

How and where can I buy Mexican auto insurance? The easiest way to buy Mexican auto insurance is online. Coverage is available from one day up to one year and it takes less than 10 minutes to buy and print out a policy. Buying online also allows you to choose a policy with features that best suit your insurance needs.

I take my car to Baja for business purposes; do I need a different type of policy? Yes. It is important to buy a "business use" policy when you are driving in Mexico for work purposes. Some underwriters apply a surcharge, while others sell business use policies for the same rate as a standard "tourist use" policy.

Hill is vice president of business development for Bajabound.com, an online Mexican auto insurance provider based in downtown San Diego.