Selecting lowest insurance premium


Any one planning to take a cover of Insurance his power of knowledge about insurance is the key to cheaper cover meaning taking a cover at the lowest possible Premium. The new regime offers an opportunity to reduce insurance premium payout through intelligent decision-making.

The Insurance Regulatory and Development Authority (IRDA) is allowing only the freeing of prices for the time being. It will allow complete release from tariff control for terms and conditions that determine the pricing only after 15 months (in March 2008), giving insures and the general public sometime to adjust to the change. For the average customers, the freeing of prices is likely to have the most impact in motor and health. Also, there will be some changes in household policies.

Motor insurance is divided into mandatory third-party liability cover and own damage, which is voluntary. A comprehensive policy includes both third party liability and own damage covers. In order to ensure the customer is not refused the mandatory third-party liability cover, IRDA has introduced the concept of a motor pool, to be managed by the General Insurance Corporation of India. The rates that will be charged by the pool have been fixed by IRDA and will be controlled by the regulator for the time being.

The biggest disadvantage here, according to insurers, is that private and passenger vehicle owners will continue to subsidize the losses from the commercial vehicle business since the rate hikes are inadequate. Even though there is an increase in the premium compared to what you’ve been paying now, it is still not market driven and unlikely to be exceptionally high.

As far as own damage is concerned, the premium rates will be determined on the basis of various factors that individual companies use to compute their claim ratios. Based on the data they have collected, factors like the make and model of a person’s age, color of the car, parking, commute time and distance, costs of spare parts and service, frequency of thefts related to the car and past claims experience will determine the premium the policy holder has to pay.

The advantage is that if one has a squeaky clean record, he’ll get a good rating and a good rate. Now one can also get different pricing deals from different companies. So, it will be worth shopping around to see which company offers the best rate.

How will it impact health insurance?

If the thought is having a free group cover for dependent parents, children and spouse from your company was enough, think again. From January, the health segment will see tremendous change since cross-subsidizing group health with profitable commercial lines will no longer be an option for general insurers. So, start picking up policies for yourself, dependent parents, spouse and children. This is even more important if you’re changing jobs frequently, as it will ensure the continuity of cover and provide insurance even after your retirement.

Families must take a proactive approach towards health insurance. They have to understand the extent of the cover provided by their employers’ group health insurance and top it up through individual health plans. Potential Policy holders will also have choice of large number of products due to product innovation. Instead of being forced to buy a product designed to fit all, they may get the choice of buying a niche product designed to suit individual needs.