If you are an individual caught by traffic police time and again for violating rules and have a record of paying fines, a motor insurance policy might be denied to you. Every person would be required to disclose this information while taking a policy.
This is just one of the few changes expected in 2013-14 under the set of new disclosures being discussed by the insurance sector to reduce losses in the segment and improve claim ratios. Sanjay Datta, head of claims and underwriting at ICICI Lombard, said the segment would see policies requiring details of driver and usage, rather than the details of the model of the car.
“Many other parameters like driver characteristics, including traffic rules obedience and consumption of alcohol, would be taken into account while issuing a policy. We are presently in the process of collecting the data and will implement these norms as and when the data has been collected and validated,” he added.
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Insurers said parameters like usage in a particular geography, and the gender of the person driving the vehicle would also be taken into account while pricing a product in the near future. Further, they have proposed that in cases where people other than the individual or his/her family member is driving the vehicle, claims could be rejected.
Explaining further, K K Mishra, chief executive officer of Tata AIG General Insurance, told Business Standard: “An idea has been floated that one wouldn't get a claim for a mishap if a friend drives the car. But if you read between the lines, it says if the car was driven with a fraudulent intent, then the claim should be rejected. This is because, many times, the owner doesn’t know about others driving a car.”
Mishra added the Motor Vehicles Act itself was required to be amended, without which the situation would not change. “We have also proposed that pricing would be model wise and usage in different parts should be weighed geographically, apart from segregation for petrol and diesel cars. Also, modern age cars should be treated differently,” he said.
To encourage voluntary disclosures, Bajaj Allianz General Insurance has a system to incentivise individuals by reducing premiums for additional disclosures. Vijay Kumar, head, motor insurance of the company, said that in other markets, the user is the most important component in motor insurance, rather than the vehicle. “An accident is caused by a person and not the vehicle. Insurers need to collect information and provide better pricing in the future. So we thought of incentivising additional disclosures,” Kumar added.
The company gives a discount of about five to seven per cent in the premium, for such disclosures done in policies done through the online channel. Kumar informed that the discounts are based on the information based and factors like age, marital status, income group and profession are checked. “The whole objective is to collect information for enabling risk-based pricing in the future,” Kumar opined.
Further, on the motor segment, insurers have also been discussing the possibility of having a long-term insurance policy, instead of the present one-year policy, which is renewed every year. Also, the amended Motor Vehicles Act is also pending before Parliament for approval. The revised act has put a limit on the maximum third party liability in case of a claim by the insured and it is expected to be capped at Rs 10 lakh. Now, there is an unlimited third party cover. This would also put a time and geography restriction for the claim to be filed.