What Are the Reasons for the Insurance Premium to Go Up
If you own insurance for your car, or are searching for car insurance quotes online, you would have noticed that insurance premiums rise periodically. Wonder why that happens?
This blog highlights many reasons why premium rates go up. We hope this will help you get a better understanding out of this and cut costs where possible.
Regulatory Agency - The cap for insurance costs is fixed by the IRDAI, short for the Insurance Regulatory and Development Authority of India. It is a regulatory body which the Government oversees through the Finance Ministry.
The car insurance premium is increased according to an evaluation done by IRDAI. Each year, the body reviews third-party insurance premiums by evaluating loss ratios to insurance companies and the number of claims. For those unfamiliar with the jargon used in the insurance world, the loss ratio is the ratio of losses to gains. It is contrary to the gross profit ratio.
Location - Car insurance quotes are often lesser in rural areas and higher in urban areas. In case you have changed your address from a town/village to a city, you can expect your car insurance premium to be revised accordingly.
History of claims - The insurance premium depends a lot on the number of claims you have made in the past year. If you drive safely and thus do not claim insurance even a single time, you can claim the NCB (No Claim Bonus) option and your insurance premium will go down.
On the contrary, your premium increases with the number of times you claim insurance, and how high the amount is.
Bad driving history - Have you been issued tickets for over speeding? Or pulled over by the cops for drunk driving? These are blackmarks on your driving record and can definitely have a negative impact on your car insurance quote.
Change in IDV - The IDV, or Insured Declared Value, is the highest possible amount the insurer will pay in case of damage/accidents to the car. This will be decided based on the age and condition of the car. Other factors, such as ownership (whether the car is owned by an individual or company), manufacturer, and model of the vehicle also influence IDV rates.
The insurance premium will increase proportionally with the increase in IDV value. However, one should keep in mind that a lower IDV is not necessarily a good thing. While a lower IDV might mean lower insurance premiums in the short run, you will be limited to a smaller reimbursement amount if a major accident occurs in the future.
Lack of anti-theft devices - The number of cases regarding stolen cars has become concerning in recent years. Some cities have seen a thirty percent increase in missing vehicles. So, insurance companies value the installation of anti-theft devices in cars. Some even offer lower insurance quotes for vehicles with such devices. A few examples of anti-theft devices are alarms, GPS systems, steering wheel locks, and brake locks.
A lack of anti-theft devices will result in higher insurance premiums, given the risks for both the vehicle owner and the insurance provider.
Add-ons - These are featuring that policyholders avail up and above the insurance cover. Add-ons will increase the cost of the premium for car insurance, making the overall expense to policyowner higher.