If you own a car, then buying an insurance for it is mandatory. It should not come as a surprise that the premiums of car insurance policies keep increasing. Should you take a look at the price trends in recent times, things will get much clearer for you.
One of the best examples is the hike in car insurance prices in the recent past. The Insurance Regulatory and Development Authority of India (IRDAI) governs such changes. In 2017, the IRDAI decided to increase motor insurance premiums in general. While there were different slabs for the increment, the maximum change was at 40%.
Change Is The Only Constant
The increase in car insurance prices was majorly due to changes to the third-party component. The premium prices for third-party policies are decided by the IRDAI and their decision to revise the same meant that everyone was affected by it. A third-party liability policy largely depends on the engine capacity of the vehicle.
One must keep in mind that the IRDAI decides the premiums of a third-party liability policy only and not other components of a comprehensive plan or riders. If there were to be any price hikes in premiums, it most likely would be for the third-party component.
Individuals who have comprehensive policies might think that they are protected from these price changes. However, that is not the case. A third-party policy is a common link in all car insurance prices. Thus, any change to the premium prices of a third-party policy affects everyone. Besides, insurance companies might also increase the comprehensive policy rates from time to time.
Understanding Price Hike
The very obvious question that policyholders might have is, why does the IRDAI keep increasing the prices of the insurance premiums. Well, there are two primary reasons.
– If the IRDAI feels that the third-party policy premiums are falling behind the inflation rates, they need to update them accordingly.
– Similarly, if they see a lot of claims related to third-party policies, the regulator might increase the premiums. This is to keep the insurance companies from running into losses.
There is another factor that can lead to an increase in the premium prices, the taxes. Insurance, in general, comes under the service category. While earlier one used to pay service taxes, GST slabs currently decide the tax rates that consumers need to pay. Insurers usually offer a car insurance calculator, which can help you get a grip on the price changes.
Ways To Avoid The Price Hike
The next obvious question would be, is there a way to save money in scenarios? The simple answer to it is yes. Such changes do not happen overnight as it takes some time to process. The regulatory body usually declares a specific date post which the hikes come into effect. If you have an existing policy, it might be worth renewing the same or buying a new policy within the deadline.
The best option to shield oneself from rising annual prices is to opt for a long-term car insurance policy. this way, you won’t have to purchase a policy annually and pay higher rates, you can purchase a policy for a three-year period at the current cost.
When you become a member of an automobile association, there is a discount for you to have. Two of the most popular associations include AAI (Automobile Association of India) and WIAA (Western India Automobile Association). You can install anti-theft devices on your car for a discount on car insurance premium as well. Note that such devices must be certified by the Automotive Research Association of India.
Whether you purchase an expensive car insurance policy or an economical one, make sure to renew it periodically to keep it active.