Team AckoSep 22, 2021
In many countries, the risk profile of a driver is one of the main factors for determining the cost of car insurance. While, in India, risk-based insurance is in the nascent stages. Some motor insurance companies are integrating technologies like telematics, Artificial Intelligence (AI), and the Internet of Things (IoT), to offer better and more importantly fair prices on their car insurance plans. Let’s understand more about car insurance for high-risk drivers and be prepared for the near future where risk-based insurance will be a norm.
From a car insurance perspective, a high-risk driver is a car owner that frequently raises claims. This is bad for both — the car owner and the insurance company. Simply put, if you are a high-risk driver and raise claims frequently, then the loss ratio of the car insurance increases i.e. the expenses borne by the insurance company towards your claim are more than the amount of your car insurance premium.
There are advanced devices that determine the risk profile of a driver. However, not every Indian car insurance company has incorporated such technology in their pricing model. These insurers use the following parameters to price a high-risk car insurance policy.
Frequent claims can increase the cost of your car insurance policy as you will lose an important discount called No Claim Bonus (NCB). Since this is directly related to claims, you may have to pay a higher price upon your next car insurance renewal.
Some insurance companies levy a higher car insurance price for young drivers i.e. car owners up to the age of 30 - 35 years. One of the reasons for this high price could be that most young car drivers have less experience in driving as compared to older ones.
On the other hand, experienced drivers may have to pay less premium as compared to young drivers. Some insurers believe that experienced drivers may drive responsibly and raise less claims.
The location of residence or where the car will be most of the time is loosely related to the chances of car theft and accidents. Some locations might be prone to theft more than other locations in considering a particular region.
As per a study conducted in the United States of America, car insurance premium drops by 5% for a married person. The logic behind the difference in premium for married and single people is that a married person is more financially stable and a safer driver than a single person.
Note: Some international car insurers consider gender as one of the factors to determine the risk profile of the driver.
You can choose the best car insurance for high-risk drivers based on the factors mentioned above.
Here are the disadvantages of being a high-risk driver.
One of the major side-effects of being a high-risk driver is the higher chance of accidents. A risky driver is often found overspeeding or not paying heed to traffic rules. This is dangerous. It puts the life of not only the driver and the passengers but of those on the road as well at risk. There could be pedestrians, other vehicles, hawkers, etc. on the road.
Another disadvantage of being a high-risk car driver is, higher car insurance premium. The insurance company will analyse your risk profile based on the factors mentioned in the above section and price your car insurance policy accordingly.
The NCB will frequently reset for a high-risk driver as the chances of raising claims are higher. This also leads to higher premiums and is a disadvantage for high-risk drivers.
Also, read: Car Insurance for Learner Drivers
Here are some tips to become a low-risk driver.
Obey traffic rules like stopping at a red light, carrying valid documents, maintaining speed as per the road signs, etc.
Learn speed management by driving slowly at first and then maintaining a steady speed.
Opting for a voluntary deductible in car insurance will help you decrease the premium as you promise to bear a part of the claim at the time of damage.
Be alert while driving as this will help you avoid colliding with any obstacle. You can control the car in time only if you are alert while driving.
Always maintain a safe distance from other drivers. You can thus take action if other drivers use emergency brakes and stop abruptly.
Control your speed while turning as there can be a vehicle approaching from the other side that is completely in your blind spot. If you make a turn at high speed, there are chances that you will hit this vehicle and cause an accident.
Use the correct posture while driving. This will help you remain in a comfortable position when you are driving for a long time. An uncomfortable posture can lead to body aches and you may lose focus.
Ensure safety by wearing the seatbelt as you remain in your seat during a collision. Not wearing a seatbelt can throw your head-first into the windshield and you may suffer significant injuries.
Avoid taking part in illegal racing or other criminal activities. This leads to claim rejection and you will be considered a high-risk driver.
Consider taking a refresher training course in driving which will help you clear the basic concepts of driving a car.
Take a look at the following table to understand the differences between high and low-risk drivers.
|High-risk driver||Low-risk driver|
|Often avoids traffic rules and likes to drive fast.||Obeys traffic rules and knows the risk of over-speeding.|
|Is considered a rash driver.||Is considered a safe driver.|
|The driver's car has many dents as it is often involved in accidents.||The car looks well maintained and has unnoticeable marks.|
|Raises car insurance claims on a frequent basis.||Has a clean claim history and rarely raises a claim.|
|Has no accumulated NCB and pays a higher car insurance premium.||Has maximum NCB, thus pays less premium.|
FYI: NCB stands for No Claim Bonus. It is a cumulative discount that increases with each subsequent claim-free year and can go up to 50% discount on One Damage (damage to the insured car) premium if you don’t raise a claim for 5 consecutive years.
The following are common questions related to car insurance for high-risk drivers.
The Insured Declared Value (IDV) is one of the factors that Indian car insurance companies use to determine the premium. IDV is calculated on the basis of the car's age i.e. the number of years from the date of manufacture. Thus, a car's age plays a vital role in calculating the cost of car insurance.If a driver is considered high-risk, is it possible to change the risk profile?
Yes, however, changing from high to low-risk would take time. The driver must take all necessary measures that would help in reducing the related risk. For example, not raising claims by driving carefully, or paying for minor claims would help.Does the gender of a driver affect car insurance rates?
In some parts of the world, female drivers are considered as low-risk as compared to males. However, pricing a car insurance policy on this parameter depends upon the terms and conditions of the insurance policy. In India, the gender of a driver is of low importance when calculating car insurance premiums.What is high-risk car insurance?
High-risk car insurance means the car owner has a high chance of raising claims. The risk profile of a potential policyholder helps in determining the cost of car insurance for that particular customer. Usually, the cost of insurance for a high-risk person is higher than the cost of insurance for a low-risk person.Are claim history and risk profile associated with each other?
Yes, car insurance companies use the claim history of a car owner to determine the risk profile of the driver. Other factors are age, location, material status, etc.
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