The way India buys motor insurance and why it must change

It is quite visible that India for long has remained under-insured and the awareness around motor insurance has been significantly less. Moreover, the extent of misunderstanding and lack of awareness amongst consumers, as well as their approach to the insurance buying experience is quite substantial. However, technological advancements in India in the last few years have created enormous opportunities for insurers to modernize, create new insurance products and services, and revamp their business models.

India is listed amongst the biggest car manufacturing countries in the world and buying the right motor insurance in India is no child’s play. With so many insurers offering an ocean of products, it is no easy to buy a product that rightly caters to the specific needs and requirements of your vehicle. When planning to buy a motor insurance policy, it is important to be well-versed with various car insurance policies and their features.

When the time comes to purchase or renew insurance, people have a variety of resources at their fingertips to help them—from discovery to purchase. Today, online channels provide an alternative to traditional conversations with insurance agents in person and on the phone. This blended path to purchase for property and auto insurance is more complex than for consumer goods. For this reason, it’s crucial for insurance brands to be top of mind when consumers need to make a purchase.

To understand how the customers and potential customers navigate the path to purchase for insurance, it is important to learn more about their mind-sets and goals at each stage; discovery, evaluation, comparison and purchase. Understanding what customers keep in mind while buying motor insurance can help insurers customise their products as per the specific needs of the customers. this will also help insurers to develop add-ons that provide overall protection to the vehicle of the customers.

Of all the people buying new motor insurance, 7 out of 10 consumers buy insurance because it is mandatory for vehicle owners and it also affords protection against financial loss attributed to damage or theft of the vehicle. However, 1/3rd of those buying motor insurance keep third-party liability in mind. Talking about awareness around lapsed motor policy, 6 out of 10 people buying insurance are aware that lapsed insurance can be renewed online, while 4 out of 10 are not aware of it or are unsure of the fact that lapsed insurance can be renewed online.

The awareness around third-party cover in motor insurance is also relatively low as only 5 out of 10 consumers buying insurance are aware that third-party cover is mandatory by law while many think that own damage cover is a mandatory requirement for car insurance, even though it is not. Surprisingly, many even think that both third-party and own damage cover is mandatory by law. 6 out of 10 consumers or 3/5th of those buying insurance are aware of the benefits one can get as part of third-party motor insurance cover. But, 1/3rd of the consumers believe that besides covering third party liability, TP insurance also gives protection against damage to own vehicle and theft which is not the case.

Awareness around add-ons in a motor insurance cover is equally important as this will help you buy a comprehensive motor insurance cover. Of all those buying motor insurance, 5 out of 10 people believed that ZERO DEP cover includes repair without deduction, damage to third-party and also covers losses attributed to theft of the vehicle. However, 4 out of 10 consumers perceive ZERO DEP to be a tool that mitigates financial loss in case of vehicle repair. Some other popular motor insurance add-ons include Key and Lock Cover, Engine Protection Cover and Return to Invoice Cover. These add-ons can be purchased at nominal prices.

Insurers play a strategic role for all consumers in designing and bringing value-creating products. The key inferences of the findings help insurers to build profitable and sustainable businesses by segmenting profiles of customers according to their buying behaviours.

Across developed markets, car insurance customer gets price quotes based on a number of personal characteristics besides the description of the car. In India, the current pricing model is a result of channel and cost considerations. It is believed that with the current findings, the market can be moved towards delivering personalized pricing. According to the findings of the report, the online car insurance industry needs to do a lot to educate the customers. Educating the customers about motor insurance is very important as it will not only increase the motor insurance penetration - which is significantly low across the nation – but will also give financial aid to road accident victims who are often left unattended during an accident.

(The author Sajja Praveen Chowdary is the Head- Motor Insurance, Policybazaar.com. The views in the article are his own and do not reflect those of DNA)