The short answer is yes. Car insurance premiums change over time. Hence, you might have noticed that the premium for your car insurance plan is different every year.
Basically, it is always higher than the previous year. The whole insurance premium concept can be perplexing because it is usually said that if you haven't made any claims or your car is old, the insurance premium should go down. Yet, even those who have not raised a claim, are paying higher premiums. Why? What's making the premium jump higher and higher with each passing year? Well, that’s exactly what we will be exploring in this article.
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Why Do Car Insurance Premiums Increase With Time?
The Insurance Regulatory and Development Authority of India (IRDAI) is responsible for regulating insurance policies in our country. Third-party motor insurance plans are especially controlled by IRDAI. This insurance plan is mandatory under the Motor Vehicles Act, 1988. It provides coverage against third-party losses and damages due to an accident.
Every year, IRDAI revisits the premium rates and changes the prices based on figures like the number of claims made in a year and loss ratios for insurance companies. So, any changes to the third-party insurance plan, you know who is in charge. The below table highlights the third-party car insurance premium rates for private four-wheelers during the FY 2022-23. It also includes the rates for 2021, so you can compare the two.
Type of car ( With Changes In Premium Rate )
A. Less than 1000cc:
In the premium rate changes from 2021 to 2022, the premium for a car with less than 1000cc engine capacity will increase by INR 2,072 to INR 2,094.
B. 1000cc to 1500cc
In the premium rate changes from 2021 to 2022, the premium for a car with less than 1000cc engine capacity will increase by INR 3,221 to INR 3,416.
C. More than 1500cc:
In the premium rate changes from 2021 to 2022, the premium for a car with less than 1000cc engine capacity will increase by INR 7,890 to INR 7,897.
Now, the prices for comprehensive plans will automatically go up because it also includes third-party coverage. Apart from the price hike from IRDAI, insurers too increase the rate for their plans based on multiple factors. Let's explore their reasons to change the rates:
- Driving Habits
Insurance providers have started using data-driven strategies and AI to understand driving habits and determine premium prices. This assessment style is not yet fully established in India. However, it can become one of the key factors to increase or decrease your car insurance prices.
- Raising a Claim
Depending on the claims history of the policyholder or the number of claims registered during the year, insurers will decide the premium rate. Insurance companies will also examine your claim history to differentiate genuine claims from fraudulent ones.
Common Reasons Why Insurers Increase the Car Insurance Premium
Have you ever wondered what causes the prices of car insurance to go up every year? Let us explore some of the common reasons in this section:
- Wider Coverage
Maybe you have been buying the basic car insurance policy–third-party liability insurance–for the last 4 years, and now you have decided to get comprehensive coverage. Or maybe, you have been buying a standard comprehensive policy for 2 years, however, now you wish to enhance your coverage with the zero depreciation cover. After all, this cover will make sure you do not lose out on the car depreciation value. Well, opting for wider insurance coverage during policy renewal will increase the premium rate. Moreover, instead of buying third-party insurance and own damage cover separately, you must consider a comprehensive plan for a more feasible option.
- Car Inspection
In case there’s a long gap between your policy expiration date and the renewal application date, your insurer might inspect the four-wheeler before renewing the cover. Even if there’s no issue with your car, inspections might lead to a hiked insurance premium. Yes, we all find the renewal process daunting… but only if you choose to renew it offline. Consider buying/renewing car insurance online to avoid such gaps. It enables you to insure your vehicle from the comfort of your home.
- Car Modification
When it comes to car modifications, there are two types–performance and aesthetic based. For example, adding car stripes on the hood of your car is deemed an aesthetic modification. If you modify your four-wheeler’s engine, it will be considered a performance modification. Irrespective of the type, your car’s value will most likely go up if you make such major changes. And a rise in the car’s value would then cause an increase in the insurance premium.
- High-Risk Profile
Under car insurance, a high-risk profile means someone who is tricky from the insurer’s perspective. Anyone who raises false claims or has been involved in the illegal use of a car is deemed a high-risk profile. Furthermore, insurance prices are bound to shoot up for anyone who has a history of making accident-related claims.
- Different Insurer
While you can switch from one insurer to another, it can lead to a premium hike. However, if you do thorough research before buying a plan, the prices can also go down. You can check out the car insurance rates via the car insurance premium calculator to compare the rates before renewing your policy. Comparing plans online will allow you to find a better deal for the same type of car insurance policy.
How to Reduce Your Car Insurance Premium
Even though there are multiple factors that lead to the hike in insurance prices, you can still lower your premiums. Read on to know how:
- Avoid Raising Claims for Tiny Expenses
Insurance premiums are high for people who make multiple claims. It is best to pay for small expenses out of your own pockets and secure your no claim bonus. This bonus ensures that you renew your policy at a lower rate.
- Protect Your NCB
Enhance your insurance plan with a no claim bonus protection add-on cover. It will keep your NCB safe and intact even if you have raised a claim.
- Renew Your Policy on Time
As aforementioned, your policy premiums can take a leap if there is a gap between your insurance expiration date and renewal application date. You might end up paying fines and even lose out on the accumulated NCB. Hence, ascertain that you renew your car insurance policy on time.
- Installing an Anti-Theft Device
Insurance providers offer insurance plans at a lower price to people who install anti-theft devices. These devices are known to reduce the possibility of you making claims due to car theft.
- Avoid Making too Many Modifications
Again, as aforementioned, making multiple modifications can lead to a price rise. Hence avoid making changes to your car on a whim. Yes, we would all like to add graphic prints on our vehicles, but it will also unnecessarily increase our premiums.
Why Do Vehicle Insurance Companies Raise Premium Rates?
Insurance providers examine multiple factors before revising their premium rates. Here’s what is generally taken into account:
- Insured Declared Value (IDV)
- Location of the insured
- Revision in rates or the terms and conditions of the insurance policy
- History of claims
Conclusion
Since you now know what causes the price hike, it is recommended that you drive carefully. You must also keep in mind that price hikes are, sometimes, unavoidable. For example, an increase in premium rates shouldn’t stop you from switching to a comprehensive car insurance policy. However, you can always choose to follow the tips that will help you keep the car insurance rates to the minimum.
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