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How To Deal With Car Insurance Premium Hike?

Team AckoJul 6, 2022

Everyone needs a car insurance plan. Due to some recent alterations to the law, car insurance costs more now. This has made the plans a little bit more expensive to own. But you still need to buy insurance. Therefore you need to find ways in which you can deal with the car insurance premium hike. Take a look at this article to know how you can tackle this issue and handle the car insurance prices effectively.

How To Deal With Car Insurance Premium Hike

Reasons for the Increase in Car Insurance Premium:

The IRDAI is responsible for the regulation of the insurance policies in the country. Especially Third-Party vehicle insurance. Third-Party car insurance is mandatory and covers liability due to third party claims arising out of accidents. 

Every year, the IRDAI reviews the premium rates by considering the number of claims raised and loss ratios for insurance companies before increasing the rates. Below are the Third-Party insurance premium rates for private two- and four-wheeler for FY 2019-20:

Type of Vehicle Premium Rate
Less Than 1000cc Rs.2,072
1000cc To 1500cc Rs.3,221
More Than 1500cc Rs.7,890
Type of Vehicle Premium Rate
Less Than 75cc Rs.482
75cc To 150cc Rs.752
150cc to 350cc Rs.1,193
More Than 350cc Rs.2,323

In recent times, the digital era has made insurance transactions efficient and fast. While offering car insurance policies to the customer, especially the Comprehensive coverage, the insurer could consider the below factors in the future:

  • Driving Habits: Insurance companies are using Artificial Intelligence and data-driven strategies to understand the driving habits to decide the premium rate. While this form of assessment is yet to be fully established in India, this could become one of the main factors which will influence either an increase or decrease of your car insurance premium.

  • Raising a Claim: Based on the number of claims registered or the claims history of the policyholder will determine the premium rate. To differentiate between fraudulent and genuine claims, insurers will assess your claims history.

Recent Premium Hike

Let us begin by understanding what the change in the law entails. Some of the main points to note include:

  • The minimum personal accident cover now stands at Rs 15 lakh. It was previously Rs 2 lakhs on car insurance.

  • This is true for third-party liability as well as comprehensive car insurance.

  • The premium for this will be a minimum of Rs 750.

These are the major highlights of the new rules. Keep them in mind when you look to calculate car insurance premium.

Why did my car insurance premium go up for no reason?

While it might seem that your car insurance premium went up for no reason, upon close inspection, it will be known that there was some cause that led to the price rise. You simply might not be aware of it, as the reason might not be obvious!

Apart from the reasons already covered, here are some causes that can result in an increase in your car insurance premium. Note that these are generic causes, which may or may not be applicable in your case. For specifics, it’s suggested to have a word with your insurer (for example, ACKO).

1. Upgraded model

A lot of times, car owners like to upgrade their car models. For example, one might opt to buy the Maruti Baleno Alpha AMT after driving the Maruti Baleno’s basic manual variant for a few years. Here, the car insurance premium for the upgraded model (Baleno Alpha AMT) will not be the same as your previous vehicle. From the insurer’s perspective, the new car will demand a higher premium as its risk quotient is higher.

2. Wider coverage

If you opt for wider insurance coverage at the time of policy renewal, your car insurance premium will increase according to the additional coverage. For example, if you happen to include Roadside Assistance Cover and Engine Protection Cover add-ons while renewing your Comprehensive Car Insurance Policy, the new premium will be higher compared to the premium without the add-ons.

This is also possible if you opt for a Zero Depreciation Car Insurance Policy (Zero Depreciation add-on + Third-party Car Insurance + Own Damage Cover) instead of only a Comprehensive Cover (Third-party Car Insurance + Own Damage Cover).

3. Different insurer

A change in the insurer can also lead to a premium hike. However, it can also result in a reduction in the premium in the case of a digital-first insurer that charges zero commission. For example, you can check out a free car insurance quote via ACKO’s car insurance premium calculator and compare the premium before renewing your car insurance policy.

4. Car inspection

If there’s a significant gap between the policy expiry date and the intended policy renewal date, then the insurer might want to inspect the car before renewing the insurance cover. Such an inspection can result in a rise in the payable insurance premium. Timely policy renewal (renewing the policy before expiry) is the best way to evade such an expense.

5. Car modification

Usually, there are two types of car modifications, aesthetic-based and performance-based. For example, if you add graphics to your car’s exterior, it will be considered an aesthetic modification. If there are modifications to the engine, it will be termed as a performance-based modification. In both cases, the car’s value is likely to increase. And such a rise in the car’s value can lead to an increase in the insurance premium.

6. Underwriting

A change in the insurance premium can also be due to the insurer’s underwriting process. Underwriting is a process through which the insurer decides the insurance premium for a particular policy. A lot of factors are considered in this process. Some are straightforward, such as the car’s make and model, while some are strategic, such as the insurer’s business model.

7. Locality analysis

Recent happenings in your locality can also have a bearing on the car insurance premium. For example, if there is data that points towards an increase in car theft or a significant rise in flooding in your locality, the insurer might increase the cost of insuring cars from such a locality.

8. High-risk profile

A rise in premium can also be attributed to a risky profile. Your profile can be termed risky if you were involved in raising a false insurance claim or your claim was rejected for reasons such as illegal use of the car. Someone with a history of accident-related claims can also be considered as a risky profile.

Why did my car insurance go up when I moved to another city?

Moving to a different city on a long-term basis warrant several changes. One such change is to change your car’s Registration Certificate (RC) and the number plate according to the applicable Regional Transport Office (RTO). Such a change can also influence the insurance premium.

For example, if you move from a tier 3 city to a busy metropolis, it significantly increases the risk from an insurer’s perspective. For instance, the new location might have a higher rate of car accidents. All this can be taken into consideration by your insurer, which can result in an increase in the payable premium of a Comprehensive Car Insurance Policy.  

Why did my car insurance go up without an accident?

While a car accident during the policy period might seem like the primary culprit for raising the vehicle insurance premium during renewal, it’s not the only factor. There can be a host of reasons that can potentially lead to an increase in the payable car insurance premium.

You can simply scroll up and check the ‘Why did my car insurance premium go up for no reason?’ section, and you will get an idea. In case you are still not satisfied with the reasons for a hike in the premium, it’s best to consult the insurer about the same. You can reach out to Customer Service and resolve your queries.

Why Do Vehicle Insurance Companies Raise Premium Rates?

Insurance companies review different factors before considering revising the premium rates. Below are the factors that insurers most likely to consider before revising the rates:

  • History of claims.

  • Location of the insured.

  • Insured Declared Value (IDV).

  • Revision in rates or the terms and conditions of the insurance policy.

Dealing with the Price Hike

As we know, the car insurance prices can’t be the reason for not buying car insurance. This is mainly because car insurance is compulsory and it helps you in various ways. It is rather unwise to drive a vehicle without a valid insurance plan in place. So what can be done to manage the expenses? Well, there are many solutions to this issue. Take a look:

  • Choose the right type of cover: You need to decide whether you want a third party or a comprehensive cover. Car insurance has other components, apart from the personal accident add-on. You, therefore, need to access the scope of coverage you want, as your overall cost will depend on that.

  • Adjust the add-on covers: These are extremely helpful, but they increase your car insurance price. So see which add-ons are essential and drop the ones you can do without. This will help you to manage the car insurance expenses more efficiently.

  • Look for discounts: You can get discounts when you buy a motor insurance policy. For example, discounts are available for members of automobile associations. You also get the plan at a discounted rate when you install some safety gadgets in your vehicle. Look for all the discounts that you may be eligible for and try to reduce your motor insurance liabilities.

  • Making claims: If you make no claims, you will be able to use the no claim bonus at the time of car insurance renewal. This will help reduce your premium. If you have not made any claims in a long time, use car insurance premium calculator. You will know the discount you are eligible for and can pay accordingly.

  • Compare: You need to run online comparisons between the available car policies before you buy a cover. This will help you to find the best plan at the best rate. Unless you compare, it would be difficult for you to find the good deals. So never make the mistake of buying a car plan without running a comparison first, especially now when the costs are soaring.

The bottom line

Car insurance price hikes are not in our control. You, therefore, need to find ways in which you can deal with such challenges. The tips mentioned above are logical and fool-proof. Give them a try the next time you look to buy or renew an insurance cover for your vehicle. You will surely end up with many savings. You will also find the perfect car insurance cover within your budget.

We try to price the insurance policy as economically as possible so that you can get the best benefits at the most competitive rate. All you need to do is to choose your vehicle from the list and then proceed with the details to purchase it online.

FAQs About Car Insurance Premium Hike:

Below are some of the frequently asked questions about car insurance premium:

Which factors affect the premium of my car insurance?

While purchasing a car insurance policy, changing the Insured Declared Value (IDV) and Deductibles will affect the premium rate. By not raising any claim during the policy period will earn a discount or a reward in the form of No Claim Bonus (NCB) which is used as a discount for the renewal premium. Also, installing anti-theft devices, choosing appropriate Add-ons, can reduce the premium rate.

Does the geographical location of the car affect the premium rate?

Yes, the cost of the vehicle differs in different locations, hence, it affects the car insurance premium rate. This is due to the IDV, which is the current market value of the vehicle, which is different in different parts of the country.

Can I reduce the car insurance premium by paying in instalments?

No, you need to pay the premium in full while buying or renewing your car insurance policy.

Will the model of the vehicle affect the insurance premium?

Yes, it’s one of the most important factors while considering the car insurance premium. Since the cost of the vehicle depends on the model, the insurance premium rate will differ between models. If the Insured Declared Value (IDV) is higher, then the premium will be higher compared to a car with a lower IDV.

Is there a different car insurance calculator for used or second-hand cars?

The factors which affect the insurance premium are the same for both new and used cars. Hence, you can use the same calculator to find out the premium and the cost of insurance for both second-hand and new cars.

Can I avail any discounts to lower my car insurance premium rate?

Yes, you can avail discounts through different methods. By claiming your NCB for the policy period, you can reduce the renewal premium which acts as a discount. Installing anti-theft devices, becoming a member of the Automobile Association of India (AAI) might earn you a discount.

How does the online car insurance premium calculator help?

Through the calculator, you can determine the approximate premium rate even before you buy the policy. You can even alter the IDV, including Add-ons, deductibles, etc. to view the premium amount for your car insurance.

Is Third-Party car insurance mandatory and who decides the premium rate?

As per the Motor Vehicles Act, Third-Party car insurance is mandatory for cars and bikes in India. The Insurance Regulatory and Development Authority of India (IRDAI) currently fixes the Third-Party insurance premium amount based on the number of claims and loss ratios of the insurance companies.

What is a car insurance premium?

The amount that you pay your insurance company on a regular basis in exchange for insurance coverage is known as car insurance premium.

By not raising any claim during the policy period, will I get any discount?

Yes, you get it in the form No Claim Bonus (NCB); however, don’t stop from raising a claim in case the cost to repair the vehicle is high.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet; and is subject to changes. Please go through the applicable policy wordings for updated ACKO-centric content and before making any insurance-related decisions.

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