K. ARAVIND
Insurance premiums are rising sharply every year, incurring additional costs for vehicle owners. The reason for the very high rate of increase in auto insurance premium is because the auto insurance claim is increasing every year. The high number of vehicles on the road without insurance is also a factor contributing to the increase in premiums.
It is estimated that two-thirds of two-wheelers in India run on the road without insurance. Two-wheelers leave showrooms with compulsory insurance. But by the second year, most vehicles no longer have insurance coverage.
This is because many car owners forget or deliberately refuse to renew their insurance. If all vehicles have insurance, the premium is likely to go down. Increasing premium income will help reduce the loss of claims insurance companies.
For example, suppose that out of 10,000 vehicles on the road, 50 vehicles are involved in accidents and the loss due to this is Rs.50,000. If all the vehicles are insured, the average risk premium per vehicle can be assumed to be Rs. 50,000/10,000 = Rs.5. On the other hand, if only 5,000 vehicles are insured, the risk premium will increase to Rs. 50,000/5,000= Rs.10 It is clear from this example that the number of insured vehicles must increase in order for the premium to decrease.
As the number of violators of compulsory auto insurance renewals increases, the government needs to take strong measures to prevent violations. However, apart from roadside inspections by the police, the authorities are not taking any other significant steps to trace the owners of uninsured vehicles.
If the necessary steps are taken in this regard, the law abiding vehicle owners will benefit from it. Measures such as showing a copy of the insurance requirement to refuel at petrol pumps can be very effective.
