‘Auto insurance industry must recognise changing consumer preferences’

Experts say that the auto insurance market will continue to grow with a large number of new models hitting Indian roads more rapidly.

The Dollar Business Bureau The Auto Insurance Industry needs to take cognizance of the changing consumer preferences and adopt appropriate strategies, said a study. A latest study conducted by the Associated Chambers of Commerce and Industry of India (ASSOCHAM), suggested that insurance firms need to change marketing strategies according to the changing demands of customers. Customers no longer want just an insurance policy but are increasingly asking for services based insurance coverage like zero depreciation insurance cover, enhanced personal accident and hospitalization cover. Stating that the insurers have been witnessing compounded annual growth rate of about 22% since 2012, the study said that the gross premium earned by general insurance companies from the motor vehicle industry is likely to reach Rs 38,200 crore mark by the end of 2016-17. In terms of revenue, individual agents contributed premium worth Rs 9,200 crore, almost double than Rs 4,700 crore collected by brokers. “With a share of over 56%, individual agents are the most preferred choice for issuing of motor insurance policies in India followed by direct business which accounts for about 22% share in this regard,” said the study titled ‘Motor Insurance: The way ahead.” Automobile industry is considered the largest market segment of insurance providers as the industry has the highest contribution (more than 47%) in the non-life insurance premium. Moreover, the segment has recorded growth rate of 22.24%. Experts say that the auto insurance market will continue to grow with a large number of new models hitting Indian roads more rapidly. “The motor insurance segment in the country is poised to grow in tandem with the growth in automobile industry as newer and faster models are hitting Indian roads along with better and larger road surface as a result of infrastructure development,” said D.S. Rawat, Secretary General of ASSOCHAM. The cumulative effect of increase in road surface and the increasing number of vehicles should directly impact the growth of motor portfolio of the non-life insurance industry, Rawat said. “Rising income levels, increased demand for vehicles, growing auto finance market, increasing health awareness and other related factors can together give a major boost to this sector,” he added. The total production of automobiles including passenger cars and commercial vehicles, two and three-wheelers has grown from about 1.08 crore in 2007-08 to 2.06 crore in 2012-13. Also, domestic sales of automobiles have increased from 96 lakh to 1.78 crore during these five years. The study also seeks to diversify the criteria to determine the insurance premium and said that factors such as age, occupation and credit score of the driver and usage of the vehicle should also be considered before fixing the premium. The current premium pricing method is based more on the year of manufacture of the vehicle, engine capacity, price and the zone in which the vehicle is bought and less on the age, occupation and credit score of the driver and usage of the vehicle. “As we go forward, realistic pricing of the insurance product will be required,” it added. The ASSOCHAM study also advised insurance companies to focus more on claims settlement, saying that inefficient processes will lead to dissatisfaction among consumers. “An efficient claims process is vital to building brand image and a customer-friendly claims process ease of submission and progress tracking is highly valued by customers,” the report said.