While everyone complains of tricks played by insurance companies or its agent during the sale of life and health insurance plans, we do not hear (or at least I haven’t heard) about similar things during sale of motor insurance.
Well, motor insurance has its own set of tricks. For instance, nobody wants to sell third party insurance. If you call customer care, they will dissuade you. Even though IRDA (insurance regulator) has made it mandatory to sell third-party policies through their websites, no insurer will easily sell you such policy. The link to purchase a pure third party cover will be hidden somewhere in the website.
What do insurance companies want to sell?
The plans that the insurance companies want to sell are comprehensive plans (that cover both own damage and third party damage). Please note only purchase of third party insurance is mandatory. This is no compulsion to purchase coverage for own damage.
The premium for third party insurance is set by IRDA and is usually hiked every year. Insurance companies have no discretion.
To be fair to insurance companies, third party insurance is a losing business (also a reason for premium hike every year) and you can’t really hold them guilty on not wanting to sell standalone third party insurance.
Premium is going to increase from April 1
Recently, I noticed another trick played by insurance companies. Though I have been paying car insurance premium for many years, this trick caught my attention only recently.
I have purchased car insurance from a private insurance company. My insurance expires in the last week of April.
I have been getting e-mail reminders from the insurance company that I should renew the insurance plan since the premiums are going to increase from April 1.
The reason is that the third party premiums are revised from April 1 every year. Since the third party premium increase every year, car insurance premiums are expected to go up every year.
This is bunkum. It is not that the insurance company will not recover the hike in third party premium. I purchased my car insurance policy in March last year. A few weeks later in April, the insurance company sent me a letter to make the payment for hike in premium.
Even web aggregators do this
And it is not just the insurance company that is doing this. Even PolicyBazaar, a leading web aggregator is indulging in such tricks. PolicyBazaar has a prominent web banner placed mentioned that the premium is going to increase from April 1 by up to Rs 2,836.
By the way, both PolicyBazaar and the insurance company are technically correct. Premium will actually go up from April 1.
However, for you, it does not really matter. Whether you purchase cover now or in April, the premium will be same. You may pay a lower premium now. However, once the third party premium is revised from April 1, the insurer will ask you to pay the deficit.
Therefore, for me, the communication is deliberately misleading and is a blatant lie.
What the Insurance Company or Policy Bazaar said?
I contacted Policy Bazaar. Their support agent maintained that any hike in third party insurance premium will not be recovered from me. I am not sure if it was due to lack of knowledge on the part of the agent or that I was being deliberately misled. I will give the benefit of doubt to Policy Bazaar.
When I contacted the insurance company, it acknowledged that any hike in premium in third party premium rates will be recovered from me and apologized for the mis-communication.
Therefore, it does not make any difference if you pay in March or in April.
You may pay a lower premium in March but the difference in third party insurance premium will be recovered from you later.
What do you do?
There is not much you can do. To be honest, awareness will not drastically change anything.
You will pay the same premium, whether you purchase now or next financial year.
However, it is better to know what you are getting into.
Personally, I will feel cheated if I bought into lower premium trick and receive a premium recovery letter later.
The advertisement or e-mails are misleading and you shouldn’t fall for that. Do not rush to purchase
Point to Note
I have nothing against Policy Bazaar. In fact, I have myself used information available on the website to finalize insurance choices. I have even made purchases form Policy Bazaar. However, you must know how to use the information and not let the web aggregator to influence your decision beyond a point. Read this brilliant piece on Money Life about web aggregators.