Sunday, June 8, 2008

Premium on theft

Paying premium for the risk of general administration failure

Insurance agents never come to you with any good news whatsoever. This is an universal fact. The other day my insurance agent called me up to inform that the insurance of my car is due and I’ve to pay my premium to renew the insurance. Along with this, she also declared that unlike my previous insurer, like most of the other insurance companies, (except for three) have decided not to insure my car (For readers’ knowledge I own a Mahindra Scorpio). I was stunned by this information and was almost in a state of shock when I heard the reason for such a stance by the insurers. She went on to state that the insurance companies have taken such a policy decision simply because Mahindra Scorpio is one of the most stolen cars!! She also stated that none out of the three companies that are insuring the car as of now, are offering any kind of discounts. It is almost a take it or a leave it offer. I clearly got an indication that if I press too much, for any kind of discounts, she would be more than happy to do away without insuring my vehicle!

Forgetting my immediate reaction, I started wondering that what should Mahindra and Mahindra do to safeguard their customers from such an ordeal! Should they start their own insurance company, or should they make their car so bad that the thieves don’t find any incentive to steal it, or should they provide such security with the car that stealing becomes almost impossible. I wasn’t sure as to what they would finally decide upon, but what I was confident is the very fact that they cannot just sit back and wait for the administrative machinery across the country to become active so that there are no more car thefts!! For they know that had the general administration been active, such thefts would not have happened in the first place.

As a result of such sustained thefts, it is incredible that unlike every where in the world wherein actuarial specialists take all possible kinds of risks into considerations before deciding upon the premium structures, in India a risk of general Administration failure is also been taken into account. No wonder that with increasing thefts, the day is not far that the balance three insurers (as in my case) would also follow suit and stop insuring the vehicle. And not just Mahindra, if this trend continues, it would invariably hit the sales of other vehicle manufacturers as well. As then before buying any car, other than general comparison parameters, consumer would also compare the theft quotient of every vehicle!! Probably then the car manufacturers would get together and through their associations, just like their other demands would lobby to the government to check car thefts!! But then that is the future, and nothing can be said for sure as to what would finally happen especially in country like India. As far as I’m concerned, at this point in time, given that theft is a reality, I’m left with just two options. Either to sell my car right now or end up paying an additional premium for the risk of general administration failure!!


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