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Motor insurance outlook for 2015

Posted by - Amitabh Jain, Head - Motor Underwriting & Claims
January 26 2015

2014 was a mixed bag for the automobile industry. Passenger cars as a segment witnessed muted consumer demand. Commercial vehicles that have been registering de-growth since 2011-12 continued to decline at -7% (Apr-Nov ‘14). While a decisive electoral mandate at the Centre revived sentiments, the impact of the mood change is yet to translate into actual purchase. The exception was the Scooter segment that grew at 28% in the first 8 months of the current fiscal. Industry stakeholders are hoping for a better 2015 aided by policy reforms, lower petroleum prices and expected reversal in interest rates.


The motor insurance segment was impacted by the automobile sector trends, and the sector grew at a slower rate of 9.8% in the 8 months of the current fiscal. While any signs of uptick in vehicle numbers will be closely watched, there are several interesting trends that the industry and motor insurance customers can look forward to in the New Year ahead.


One of the key facilitators in 2015 would be the proposed introduction of the Road Transport and Safety Bill. Scheduled to replace the erstwhile Motor Vehicles Act, 1998, the bill aims to arrest the rate of incidence of deaths and injuries caused by motor accidents. It focuses on improving safety standards of vehicles, enforcing compliance to rules by motorists and levying heavy penalties in the form of monetary and legal action on the violators. This should help reduce the country's road accident fatality rate, which is one of the highest in the world.


The bill also plans to introduce a National Unified Information system which will centralize details on vehicle registration, driving licenses, insurance, permits, penalties and accidents. This can address one of the most contentious issues raised by motor insurance companies for long. As is widely known, India has a high percentage of uninsured vehicles, with some reports placing this population at 30 - 40%. The availability of a central database will foster efforts towards increasing insurance penetration and allow identification of fraud arising out of forged documentation of insurance policies, vehicle registration etc. The bill also recommends the implementation of DAIR (Detailed Accident Investigation Report) framework which will reduce reporting time for insurers and the waiting time for claimants thereby improving customer experience when it comes to third party motor insurance claims.


The central database could also allow insurers to apply risk based pricing wherein the risks applicable to the driver and vehicle in question are factored in while arriving at the premium instead of the current limited approach of asset based pricing. This will directly benefit those customers who follow safe driving habits and practice timely renewal of mandatory documents i.e. insurance policy, driving license etc. in the form of lower motor insurance premiums.


On the product front, 2015 should see the continuance of customer centric solutions from insurers. Insurance companies are gradually evolving from being mere risk financiers to performing the role of risk managers. Within the motor insurance space, companies are introducing innovative offerings. Benefits such as six-month warranty on quality of repair are now being offered by some insurers. Similarly, assistance services in the form of towing facility, emergency accommodation are becoming mainstream. In the coming year, motor insurance customers can look forward to newer benefits such as insurer provided extended warranty on motor parts, interest on delayed claim payments etc. Customers can also look forward to longer term policies that will reduce the hassle of yearly renewals.


Technology is pervading our lives like never before. Even as insurance companies promote online insurance purchase, the coming year will see a greater emphasis towards providing value add services and convenience to customers through the digital medium. Mobile as a platform will take the centre stage as insurers experiment with innovative solutions through mobile apps to drive engagement and build customer loyalty.


Another area that should see increased activity is the analytics space. Having access to reams of customer details and claims data, insurers will work towards building capabilities to better understand their customers. The focus would be on predicting potential fraud using analytics and investigating those cases in time. This will help hasten the settlement process of genuine claims thereby providing a better claim settlement experience to the larger base of customers.


The New Year holds a lot of promise for Indian consumers. For Motor insurance customers, this should translate into better products, convenient services and an overall enhanced experience from their vehicle insurance policy.

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