Car sales may skid on new insurance rules
The new motor insurance regulations to take effect from Saturday would, fear official sat automobile companies, imp el those wishing to buy cars or two wheelers to postpone purchasing.
Car dealers have been flooded with calls from buyers who had booked new vehicles in the past fort night. The new regulation man dates buyers of cars and two-wheelers to purchase up front insurance cover for at least three and fiveyears, respectively. On August 20, the Supreme Court directed insurers to offer long-term third-party covers. Insurance is mandatory for all road worthy vehicles in India but owners tend to skip rene wing the policies after these lapse. A longer tenure and up front payment of the premium would save buyers the trouble of annual renewals but would proportionately raise the initial out go on new vehicles, pushing up the on road prices.
“There is a lot of confusion in the market ,” said a Ma ru ti Suzuki India dealer ." This is being done without any prior intimation. Customers who booked a few days before have been calling to know what would be the additional out go."
Depending on the engine size, the premium will vary. For instance, the initial cover for a three-year period on a new private car exceeding 1,500 cc will be about ~20,000, up from ~7,900 now for a one-year period. For motorcycles with an engine capacity beyond 350cc, the buyer will have to pay ~9,000-10,000 for a five-year cover, as against ~2,300 currently for a one-year period, say automobile dealers.
Car makers say the move will disrupt sales only temporarily .“Doubt less, there will be short-term pain for consumers and for us as manufacturers. Consumers will tend to postpone purchase but we expect the situation to settle soon ,” said an official at one company, declining to be identified.
“There are discussions regarding giving insurance companies a breath er for a month or so,” said an executive at another car company.
“There could be some impact in the short term, as the initial out go for buyers will goup,” said Sugato Sen, deputy director general at the Society of Indian Automobile Manufacturers.
Under the new regulation, buyers have an option. Either to choose a one-year policy that includes premium payment for own damage (OD) plus three-year mandatory third-party (TP) premium or a comprehensive cover for both OD and TP for three years each. The increase in premium will be sharper if a buyer goes with the second measure.
There are some ambiguities, said an official at a car company cited earlier. Forinstance, it does not clarify the provision if a buyer is looking to switch his insurance provider before three years. While the OD can be managed by the new company, what happens to the lump sum deposit the buyer has already made?
Also, unlike the current scenario when one gets the noclaim bonus’ in the second year if the vehicle hasn’t met with an accident, one will have to wait three years for this. One does not know how the insurance regulator will address it, said the official.
Two-wheeler companies are also bracing. To tide over the impact of a possible slowing in sales, Bajaj Auto on Wednesday announced free insurance for select models till Friday. Its rivals have refrained. A Hero MotoCorp spokesperson said it had no such plan, while adding the new regulation would translate into an increase in the on-road price of motorcycles and scooters, affecting retail sales in the short term. “However, the demand remains robust and we expect this to continue in the long term,” he said.