Bharat NCAP's influence on car insurance: Potential for reduced premiums for consumers
Delhi : Bharat New Car Assessment Programme (Bharat NCAP or BNCAP), India's first-ever homegrown program for testing and evaluating automobile crash safety, has just been launched. With this program, India will join the US, China, Japan, and South Korea as the fifth nation in the world with such a safety test and evaluation process, with enforcement set to begin on October 1, 2023. The Indian government expects this program to improve consumer knowledge of vehicle safety, the safety of Indian cars, and the exportability of Indian-made vehicles.
When a vehicle is insured, some auto insurance companies offer insurance coverage at a lower cost if the covered vehicle has a variety of technologically assisted safety features that reduce the risk of theft or other damages.
As a result, there has been increased speculation that insurance rates may be reduced for vehicles that receive higher safety ratings under the new Bharat NCAP program. In addition, there are concerns about how the Bharat NCAP may affect the automobile insurance sector, a significant participant in the ecosystem of the industry.
What experts in the auto industry think
Some analysts in the car industry believe that the Bharat NCAP presents a chance for insurance companies to implement a preferential premium pricing scheme. Avik Chattopadhyay, a former marketing director for Volkswagen India, predicted that the BNCAP will persuade people to consider buying a safer automobile rather than just the cheapest one.
The BNCAP program will provide insurance companies with a fantastic opportunity to offer preferential premium pricing for automobiles that receive more stars; the more stars, the lower the cost. That will be a surefire technique to persuade the potential customer to select a safer automobile rather than just one that is less expensive. This is comparable to selecting a cleaner car over a polluting one. According to him, it will be to the consumer's advantage.
Puneet Gupta, Director of S&P Global Mobility, shared similar sentiments while discussing the effects of the BNCAP and its effects on the auto insurance sector. He thinks that the new Bharat NCAP safety rating can definitely be used by auto insurance providers as a means to raise prices for cars that aren't registered with the program. According to Gupta, this would eventually push Indian automakers to switch to producing safer cars, which would benefit Indian consumers. "Bharat NCAP is a positive development. Customers will now be able to distinguish between items and choose safer variants, he continued.
Anuraag Bharadwaj, Vice President and Industry Leader for Automotive, India-Capgemini, thinks that the implementation of BNCAP will reduce the likelihood of accident occurrence, leading to the calculation of actuarially cheap premiums. Accordingly, he predicted that insurance premiums will decrease in the medium run. Insurance firms must consider the prices they charge for occupant life cover as vehicles get safer and must consider lowering those costs as fatalities would be decreased, according to Bharadwaj.
Specialists in the insurance sector have to say
The Bharat NCAP, according to industry experts, will make Indian cars safer, improving consumer safety overall. However, it is unclear whether the new safety standard would affect auto insurance costs in a way that benefits car owners. Leaders in the insurance sector are not certain whether or not auto owners' own damage coverage costs will reduce, but they are optimistic that the BNCAP may result in lower third-party responsibility premiums. According to Nitin Deo, Chief Technical Officer of Zuno General Insurance, with the improved safety standard, there will be fewer accidents, fatalities, and injury cases, which will lower the insured's third-party premium costs.
The quantity of accidents, fatalities, and injury cases each year directly affects third-party premium. Such incidents would decline and relieve the insured's third-party premium burden with improved safety standards, he continued.
When questioned about the same, Future Generali India Insurance Company, another significant player in the market, responded that it is still too early to draw any conclusions about how Bharat NCAP may affect the auto insurance market. In a word, motor vehicle insurance covers three things: third-party damages, vehicle damage, and occupant life insurance. Only one factor—the danger to occupants—will be impacted by Bharat NCAP, while the other two aspects won't change.
