Wednesday, 14 December 2016

Important aspects and observations behind motor insurance claims ratio

Few important observations in insurance loss ratio across different vehicles:

 

1. Claims ratio is driven by many factors including usage pattern, popularity, demand in terms of specific geographical areas, spares cost, child parts availability, spares availability in after market, type of end users, safety measures & equipment used in car.

2. Diesel cars of same size/segment as compared with petrol cars tend to ply more on roads and hence draw a higher claims ratio (by approx. 5-7%).

3. There are cars where the similar platform is used to make hatch back and notch back (sub 4 meter car) which keeps many body spares common in both hatch a well as the notch back models. It’s generally seen in such cars that hatch will have a higher claims ratio (approx. 5-8%) considering the fact that the buyer belongs to similar category and repair cost almost remains same in both hatch and notch back. However, hatch back models is charged lower insurance premium due to lower ex showroom cost which results into higher claims ratio.

4. Cars will higher parked population seems to draw slightly lower claims ratio as there are repair facilities available in open markets as well for more popular cars and spares tend to cost lesser as compared with lesser popular cars. Also, the indigenous production impacts the overall loss ratio on positive side.

5. Normally, small cars or entry level cars attract higher claims frequency since mostly buyers are first time buyers and are likely to increase the collision ratio.

6. Cars bigger in length are on many occasions being chauffeur driven keep the risk at lower side as it completely avoids the practices like using mobile while driving or any such practices. Also, city commuters with chauffer driven cars seems to have far lesser total loss, theft and third party loss incidences.

7. Few models being frequently used in commercial purpose like Innova and Tavera have surprisingly lesser claims ratio in terms of own damage claims, however, theft drives the losses to higher side in such models.

8. It’s normally difficult to establish the loss ratios in models which are too new or not sold much in market. As a result, the trend for such models might change over time.

Effect of demonitization on general insurance business in India


New motor insurance business: Since, new motor insurance business is directly related to the new car sales it has seen its impact accordingly. In A class cities mostly insurance companies were short of their targets by 12 to 15%. In B class cities where rotation of cash is more prominent a negative impact of 7 to 10% has been reported by almost all insurers. PSUs where business is significant from B and C class cities have seen an overall impact of around 12-15%.

 

Renewals-Motor: The impact in A class cities has been very limited as most of the insurers have performed at above 90% expected levels. Availability of e-payments and already being widely used are the reasons that renewals are not much affected in A class cities. B and C class cities have seen delayed renewals and the impact has been 20 to 22% on negative side.

 

Non-Motor insurance: Health insurance has seen impact on new acquisition side and targets were short by as high as 25% in B and C class cities. A class cities have seen the impact of 15%. Renewals are not affected much due to nature of product.

 

Other line of business: Rural market has been under impact and PSUs have suffered due to the same as seen in many products like agricultural, small ticket personal accident covers, cattle insurance and agriculture insurance have seen the impact.

 

In totality, the actual impact can be measured in next 2-3 months as there may be delayed purchase decision which may actually come into account once the situation becomes normal. Still, industry can’t deny the impact of 15% impact on business across the cities and segments.