Car Firms Dole Out Free Insurance

The auto industry is offering free auto insurance cover ahead of the Union budget. Insurance accounts for about 3 per cent of an automobile's cost. Most manufacturers cite "bringing excitement into the market" as the reason for the free insurance cover.

Maruti Udyog, for one, has announced free motor insurance and personal accident cover in tandem with its dealers and Bajaj Alliance to keep sales ticking ahead of the budget. Company sources said the offer comes immediately after it achieved its highest sales for the current fiscal in January, and is aimed at wooing customers, who might put off their purchase decisions till the Budget, hoping for a duty cut.

 

Maruti's special offer is valid till February 25 on its entire range of vehicles.

Ford India declined that their free insurance cover offer has anything to do with the budget, but said it was meant to achieve good sales in the January-March quarter, which accounts for almost 30-35 per cent of its annual sales. Vinay Piparsania, vice-president (external affairs), Ford India, said the entire cost of the insurance cover will be borne by the company. After recording lower sales than expected in the 2001, the company is now looking at equalling sales in the first half of this calendar year, and a growth in the second.

Rajesh Jejurikar, vice-president (marketing), automotive sector, Mahindra & Mahindra, said the company was offering free insurance, worth about Rs 12,000 in certain markets. "It is not necessary that we offer a good deal only when the market is down. We could do it also to make the most of a good season," he said.

Motor insurance, being a tariff product in India, accounts for 3 per cent of the value of a car.

On a Maruti 800 bought in Delhi, a customer pays around Rs 8,500 as the annual premium cost on motor insurance and accident risk cover. This includes, a free personal accident cover of Rs 2.5 lakh, and Rs 10 lakh cover in case of death in the air. The premium costs will be borne by the manufacturers.

Sam Ghosh, chief executive officer, Bajaj Allianz General Insurance Company said that pushing sales through offers of free insurance cover by domestic auto companies is in line with the practices of many manufacturers in Europe. "We anticipate 20,000 policies to be sold in the next two weeks through Maruti alone," he said.

Auto dealers in Mumbai too agree. "We expect at least 25 to 30 per cent growth through the introduction of these free risk covers," a leading Maruti dealer said.