Regardless of anecdotal warnings, I clung to the assumption that my motor insurance coverage – renewed faithfully for the final quarter century – would not let me down. Solely 3 months in the past, I witnessed, for the primary time, how my coverage was invoked to pay for minor repairs when a cement-mixer driver, engrossed on his cellular, rear-ended my stationary automobile.
There was no additional interplay with the insurance coverage firm – till I obtained an e mail just lately, informing me that, ‘contemplating the expertise of the coverage/phase’, my coverage wouldn’t be renewed two months therefore. As a concession, nonetheless, they had been pleased to supply me third-party legal responsibility cowl at half the value of my erstwhile premium quantity.
A good friend, who’s an actuary, shrugged dismissively. ‘The left hand would not know what the appropriate hand is doing. Name and enquire.’ One other good friend, an insurance coverage dealer, responded with a extra Gallic shrug. ‘There’s nothing you are able to do. Tata AIG and HDFC Ergo are probably the most conservative companies on the market, and probably the most continuously responsible of any such dereliction.’
‘Was this pushed by the ₹7,000 restore cost that your insurance coverage firm incurred?’ I requested.
‘No. In that case, solely your no-claims bonus would have been affected.’
‘Ought to I name them?’
‘You may strive,’ my dealer replied, ‘However no additional clarification will likely be forthcoming.’
He went on to clarify that regardless of having provided basic insurance coverage insurance policies for many years – motor insurance coverage, marine insurance coverage, plant and equipment insurance coverage et al – issuing corporations proceed to market solely standardised merchandise for 2 causes. The primary centres on how knowledge is used; the second on how these merchandise are offered.
Within the first occasion, though appreciable particular person knowledge is out there to an insurance coverage agency on accidents and different occasions and on the severity of affect, none of that is used – both on account of price implications, or lack of competence – to create graded danger profiles and advantages whereas formulating product constructs.
Within the second, salespeople deal with negotiating with the client, pruning advantages indiscriminately, and granting reductions the place potential to fulfill the wants of the client’s pockets and full the sale, the one end result to which all incentives are aligned.
The Insurance coverage Regulatory and Growth Authority of India (IRDAI) abets this suboptimal product combine by selecting as its goal progress of insurance coverage merchandise per capita on the expense of relevance, customisation and differential pricing.
So, insurance coverage corporations are permitted to enter and exit markets and product constructs at will, utilizing capability and willingness to pay as the one acceptance criterion in a given yr or time interval, using the incurred claims ratio – a measure of whole claims incurred as a proportion of whole premiums earned – to disclaim coverage renewal.
Since motor insurers lack a reinsurance security web, they might deny protection broadly, like all autos in a regional transport workplace (RTO), or a complete kind of car, to restrict potential losses.
‘As an illustration,’ my good friend added, ‘the coverage could have been rescinded due to the huge payout insurers will incur on account of the biblical flood that totalled 1000’s of vehicles on this metropolis final month. Or, it might be that too many SUV drivers like you have got raised claims within the final yr. However don’t fret,’ he concluded, ignoring my catatonic stare, ‘I am going to discover you one other coverage that is simply as complete.’
Once I performed all this again to the actuary, he shrugged dismissively once more. ‘When will personalised knowledge drive presents and coverage renewals?’ I demanded.
‘When the left hand is aware of what the appropriate hand is doing,’ he affirmed. ‘However wait awhile. A Tata AIG consultant will name you quickly to both renew, or resell, the identical coverage.’
