As the Indian passenger vehicle market moves decisively towards diesel,
the shift is leaving its mark on motor insurance premia as well. The
premia differential between petrol and diesel vehicles has shot up to
20-22% in certain categories with insurers claiming higher usage,
pricier spare parts and steeper maintenance costs as the reason for the
higher insurance premium. Diesel vehicles have always commanded higher
motor insurance premium and the differential between petrol and diesel
variants has traditionally been around 10-15%. But with diesel vehicles
ruling the auto mart, that differential has been on the rise.
"With the arrival of new diesel models in the last couple of years, especially in the hatch back and mid size segments, this (difference) has now moved up to 20% to 22% in the case of certain vehicles," said Vijay Kumar, head, motor insurance, Bajaj Allianz General Insurance. Agreed KN Murali, senior vice president and head, motor vertical, Bharti AXA General Insurance, "In case of some models and in certain geographies, the premium differential can move up to 20%." Since diesel cars have higher usage and the cost of spare parts is higher than their petrol counterparts, this is reflected in the premium pricing.
"Diesel cars have higher claims ratio than petrol vehicles," added Murali. Part of the reason why diesel commands a higher insurance premium has to do with the premium pricing of diesel vehicles. Typically the price differential between the petrol and diesel version of a hatchback model can range from Rs 50,000-70,000. And with car companies raising prices, the premia also goes up. But, said Rakesh Batra, India automotive sector national leader, Ernst & Young, "diesel technology, even in its latest avatar, does command higher maintenance cost. That’s as true globally as it is in India.
The engine configuration requires more frequent maintenance because it suffers greater wear and tear." Insurers say the other aspect of diesel vehicles is that a significant number of them are in the people mover (cabs and tourist taxis) category so they clock higher mileage on a daily basis (50-100 km) when compared to petrol vehicles which run for about 15-30 km every day. "The probability of accidents is higher in the case of diesel cars as against petrol vehicles as the former run longer on the roads. As the risk is higher in this category, that gets reflected in the premia as well," said Murali. The diesel-petrol differential is not the only fuel-led differential in motor insurance.
With alternative fuels like CNG becoming popular, a premium differential is also emerging in CNG fitted cars as compared to petrol or diesel cars. "Many customers are retrofitting a CNG kit as the car turns slightly older," said Vijay Kumar. These kits are normally priced between Rs 40,000 and Rs 45,000 and when the motor premium comes up for renewal, insurers charge an additional 4% on the value of the CNG kit (Rs 1,600-Rs 1,800) for such vehicles after deducting the no claim bonus. "As a category change and a modification has occurred in the vehicle, this results in an additional surcharge," said Tarun Kumar Singh, chief executive officer, of financial consultancy, Finexure Consultancy Services. "But what happens when the OEM supplies factory fitted kits on new vehicles? Not all CNG fitments are after market options."
source: ET
"With the arrival of new diesel models in the last couple of years, especially in the hatch back and mid size segments, this (difference) has now moved up to 20% to 22% in the case of certain vehicles," said Vijay Kumar, head, motor insurance, Bajaj Allianz General Insurance. Agreed KN Murali, senior vice president and head, motor vertical, Bharti AXA General Insurance, "In case of some models and in certain geographies, the premium differential can move up to 20%." Since diesel cars have higher usage and the cost of spare parts is higher than their petrol counterparts, this is reflected in the premium pricing.
"Diesel cars have higher claims ratio than petrol vehicles," added Murali. Part of the reason why diesel commands a higher insurance premium has to do with the premium pricing of diesel vehicles. Typically the price differential between the petrol and diesel version of a hatchback model can range from Rs 50,000-70,000. And with car companies raising prices, the premia also goes up. But, said Rakesh Batra, India automotive sector national leader, Ernst & Young, "diesel technology, even in its latest avatar, does command higher maintenance cost. That’s as true globally as it is in India.
The engine configuration requires more frequent maintenance because it suffers greater wear and tear." Insurers say the other aspect of diesel vehicles is that a significant number of them are in the people mover (cabs and tourist taxis) category so they clock higher mileage on a daily basis (50-100 km) when compared to petrol vehicles which run for about 15-30 km every day. "The probability of accidents is higher in the case of diesel cars as against petrol vehicles as the former run longer on the roads. As the risk is higher in this category, that gets reflected in the premia as well," said Murali. The diesel-petrol differential is not the only fuel-led differential in motor insurance.
With alternative fuels like CNG becoming popular, a premium differential is also emerging in CNG fitted cars as compared to petrol or diesel cars. "Many customers are retrofitting a CNG kit as the car turns slightly older," said Vijay Kumar. These kits are normally priced between Rs 40,000 and Rs 45,000 and when the motor premium comes up for renewal, insurers charge an additional 4% on the value of the CNG kit (Rs 1,600-Rs 1,800) for such vehicles after deducting the no claim bonus. "As a category change and a modification has occurred in the vehicle, this results in an additional surcharge," said Tarun Kumar Singh, chief executive officer, of financial consultancy, Finexure Consultancy Services. "But what happens when the OEM supplies factory fitted kits on new vehicles? Not all CNG fitments are after market options."
source: ET
