Daijiworld Media Network – New Delhi
New Delhi, Jul 17: Many vehicle owners assume that a claim-free year automatically guarantees a lower or unchanged insurance premium at the time of renewal. However, insurance experts say several other factors can lead to an increase in premiums even if the policyholder has maintained a clean driving record.
According to Aditya Kumar, Head of Motor Underwriting at Digit Insurance, motor insurance premiums are determined by a combination of factors, including the vehicle's age, engine capacity, insured declared value (IDV), and the type of coverage selected. As a result, changes in these factors can increase the renewal premium irrespective of whether any claims were made during the policy period.
One of the most common reasons for a higher premium is allowing the insurance policy to lapse. A break in continuous coverage is often viewed by insurers as a higher risk, which may lead to an increase in renewal costs. A lapse beyond the permitted grace period can also result in the loss of the accumulated No Claim Bonus (NCB), a discount offered to policyholders for claim-free years. The NCB starts at 20 per cent after the first claim-free year and can increase up to 50 per cent after five consecutive years without a claim.
Experts also point out that changes made during policy renewal can affect the premium. Choosing a higher IDV to reflect the vehicle's market value or opting for additional insurance add-ons can increase the overall cost. The price of add-on covers generally rises as the vehicle ages, while the base own damage premium may also be revised when a vehicle crosses certain age milestones, such as five or 10 years.
Apart from policyholder decisions, regulatory changes can also influence premiums. Third-party insurance rates are fixed by the Insurance Regulatory and Development Authority of India (IRDAI). Any revision in these rates automatically affects the total premium payable by vehicle owners.
Insurance experts advise motorists to review their coverage requirements before renewing policies. Owners of older vehicles with lower market values may consider reassessing whether comprehensive coverage remains cost-effective. They also recommend selecting only essential add-ons and exploring options such as Pay As You Drive (PAYD), which allows motorists with lower annual mileage to reduce their insurance costs by opting for kilometre-based coverage.
Experts say maintaining uninterrupted insurance coverage, preserving the No Claim Bonus and choosing suitable policy options can help motorists manage renewal costs more effectively while ensuring adequate protection.