Affordable cover for premium cars online

If you are looking to buy a premium or luxury car, it will be cheaper for you to go in for an online insurance package where discounts can be upwards of Rs 10,000. Chennai-based V Sidharth discovered that when he went insurance shopping for the Mahindra XUV he has just bought. Sidharth was surprised when the local dealer quoted Rs 52,000 in insurance premium for the new vehicle. "I went back and did a bit of research and found out that if I purchased the same policy online, I could get it for Rs 30,000," he said.

Sidharth's isn't an isolated case. According to insurance industry experts, the difference between online and offline purchase of a motor policy in the case of luxury and premium vehicles can range from 30% to 50% "as such cars normally have higher premia," according to G Srinivasan, CMD, New India Assurance.

Kalyani Narayanan, CEO, Easyinsuranceindia, said, "Insurance companies give us the best discount on tariff rates and we in turn pass it on to the customer." She added her company gives up to 50% discount from the tariff rate on insurance for Audi, Mercedes Benz and BMW cars.

So what's the catch? Industry sources say it lies in the claim experience. OEM-insurance brands as well as dealer-initiated packages offer much better claim experience if at a premium. "Often there is a lot left unsaid in online packages with, say, plastic parts not included and the claim experience may not be worth the discount on offer online," said a dealer. Indeed, company insurance brands say their retention levels are very high — upwards of 70% — because customers find the service experience better despite the extra cost.

Often it is also a question of convenience and relationship with the dealer.

Said Jaideep Devare, MD, Mahindra Insurance Brokers, "Service is available from the dealers in case of claims. For the customer, it's more convenient to contact the same dealer from whom they purchase a vehicle to also support insurance claims at a single point. For online buying, largely the premium benefit is available to the customer, but they have to interact with the insurance company directly for all claims."

Industry observers say there are many reasons why online insurance is cheaper. Since the de-tariffing in 2008, insurance companies can offer anything from 1% to 60% discount, said the MD of a company-initiated insurance brand. "Premium is decided on acquisition cost and claim ratio," he said. "Dealer insurance includes dealer commission and in higher-end chauffeur-driven cars, where the claim ratio is lower, the premium will also go down accordingly." A premium sedan like the Honda Accord, for instance, boasts a low claim ratio of just 40% since 75-80% of this model is chauffeur-driven. "So insurance companies can give more discounts on models like this," he added.

For customers who don't drive themselves or use their cars less frequently, online purchase makes sense. "Most dealers make money not on the car but around the paraphernalia surrounding it like insurance, warranty and accessories," said Rahul Aggarwal, CEO, Optima Insurance Brokers, an insurance brokerage firm. Then there's the question of comparing rates. Insurers say that insurance differential and resultant consumer behaviour works best in the mid segment range (cars priced between Rs 6 lakh and Rs 16 lakh). "While this category of customers are upgrading from the entry-level car to the next bracket, they are still value-conscious and won't mind good deals and bargains if they are aware of the same," said an insurer who did not want to be named. In the case of luxury cars, however, it is not the insurance channel that matters but the availability of a relationship manager to take care of all the requirements pertaining to the car.

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