Car Insurance: Luxury car premiums rise on higher claims

Private general insurers have stepped up premiums by 10-15 per cent for luxury cars whose owners have shown a propensity to making high claims. However, premiums for other cars remain where they were.

The premium for the first renewal of cover for a BMW 5 series insured with Bharti Axa for Rs 40 lakh was Rs 64,056 in  September last year. Today it is Rs 71,401.

The premium for a BMW X1 insured for Rs 28 lakh was Rs 45,834; now it is Rs 50,993. Similarly, for an Audi A6 with an insured  value of Rs 40 lakh the premium was Rs 64,056 a year ago; today it is Rs 71,401.

A Mercedes E class with an insured value of Rs 60 lakh required an insurance premium of Rs 94,427 last year; this year it is Rs  1,05,415.

Only in the case of a BMW 7 series car, valued at Rs 1 crore, the premium remains at Rs 1,73,000.

In contrast, the first-renewal premium for a Hyundai i20 has stayed constant at Rs 13,602.

“Insurers have been seeing a higher claims ratio in the luxury segment. This has pushed up the premium for luxury cars by 10 to 15 per cent,” said K G Krishnamoorthy Rao, managing director and CEO of Future Generali India.

Luxury cars, i.e. cars costing above Rs 25 lakh, are a rapidly growing segment, gaining 50 per cent annually.

“Depending on individual insurer’s claim experience, the premium rates are changed. In the past few months the rupee has been under pressure; this has increased cost of imported spares and repairs of luxury cars,” explains Arvind Laddha, CEO of Vantage Insurance Brokers.

Experts say bad Indian roads could be one reason for claims going up.

A R Sekar, officiating CMD of New India Assurance, said, “Premium is a function of claim experience of an insurance company; as the insurer witnesses a rise in claim in any segment, the premium goes up.”

In 2007 the insurance regulator had freed motor insurance tariff, letting insurers fix their own premiums as per their claim experience and market factors. However, the regulator still regulates third-party insurance premium.

“Motor insurance is still evolving. Earlier, because of lack of data and price competition, premiums were low. But now, insurers analyse their claims database; thus premiums have gone up. So far the claim experience has not been favourable and another increase in premiums can be expected in a few in months,” said Vijay Kumar, head of motor insurance of Bajaj Allianz.


At the time of registering a claim, policyholders generally see if the no-claim bonus (NCB) or the claim made will be better for them financially.

“In most cases the claim amount is higher than NCB, so the policyholder goes in for making a claim. Moreover, luxury cars use a lot of sophisticated and interconnected devices. So even for a small problem a whole device may need replacement,” according to K N Murali, senior vice-president and head of motor vertical of Bharti Axa.

The rapid growth of the luxury car segment has created good volumes for insurers. “Our market analysis shows the luxury car user profile has changed drastically. Earlier these cars were chauffeur driven; now even youngsters drive them, which adversely affects claims,” said Amitabh Jain head of motor customer service of ICICI Lombard.