Impact of COVID-19 in the Motor Insurance Industry in India
Coronavirus has taken over the whole world by storm and affected human health and led to death in millions. Pandemic has influenced every sector such as health, automobile, including the motor insurance industry. Talking about motor insurance, we already know that buying vehicle insurance is mandatory for every vehicle owner in India under the law of the Motor Vehicle Act, 1988. COVID-19 pandemic became one of the challenges for the insurance sector that led to lock-down which ultimately dropped the sale of motor insurance. Before the pandemic, people used to visit a car dealer or insurance company. But due to the pandemic restrictions and social distancing, the insurer couldn’t provide timely services. To avoid infection, people were asked to remain inside their houses and take precautionary measures. All types of businesses were closed except the essential ones. People were not allowed to visit any showroom or company.
The challenges faced by the automobile and insurance industry –
COVID-19 pandemic has a notable impact on individuals, businesses and society, and the wider part of the population. Due to this, the insurance industry has gone through several challenges. At the same time getting new opportunities for the long term.
The auto industry is impacted badly because of coronavirus disease. This is why the auto industry has been through the worst time and it ultimately affected the motor insurance industry in several ways. Car sales have gone low due to the crisis. Also, the implementation of BSVI has made it expensive to purchase cars due to which demand drops down.
Currently, we can’t understand or predict when the COVID-19 will be over. However, people wish their car insurance companies would reduce premiums during the pandemic period. But, once someone bought a vehicle he or she must buy a motor insurance policy even if they are not running it.
As per the Federation of Automobile Dealers Association (FADA) report, motor vehicle sales had a drop of 31% in FY-21. Following this, there was a fall in the number of motor insurance policies. There was about 14.04% growth in FY19-20 for own damage premium which dropped to 13.11% in FY20-21. There is one way that helps people in buying motor insurance is online mode. Through this mode, one can easily visit the insurer’s website sitting inside the house while maintaining social distancing. There is no physical presence needed, no paperwork for buying or renewing an insurance plan. According to IRDAI, business premiums have witnessed a 16% Year-on-Year growth, and the life insurance industry grew about 21% higher in February 2021 as compared to 2020.
There are certain challenges motor insurance in India has faced –
Amid the pandemic, there was a lack of purchase of new vehicles and negligible claims because people were in isolation to avoid the disease. This pandemic phase drops down the demand for new vehicles.
Also, there was a lower demand for commercial vehicle insurance as passenger-carrying vehicles were not in use due to social distancing decorum. Due to Coronavirus, people got scared to travel in public transport to avoid inconvenience. And, that’s the reason why people no longer ask for commercial vehicle insurance.
Social distancing impact on commercial and private vehicles sales –
In the pandemic, most people preferred to purchase two-wheeler or low-budget private cars as per the Indian public transport facilities and overcrowding. Because cars are safer and more isolated and two-wheelers don’t carry more than two people.
Whereas, the FADA’s report shows, 11.56% fall in private cars sales, 34.58% dip in commercial vehicle sales. However, the sales of motor insurance may increase in the near future as more people may opt for a private vehicle rather than preferring public transport.
Going towards virtual future in insurance –
In response to the crisis, insurance companies are making quick decisions in extending remote services for customer protection. Due to this pandemic and social distancing norms, the trend for automation and digitalization is taking place. This is changing economic demography and customers’ expectations. Today a major part of the world has shifted or relied on the online medium for multiple tasking. Hence, remote work has remained the norm at many firms. For building customer relationships virtual interaction is playing a vital role today. This is helping in building better communication, greater efficiency, and better outcomes.
Not only buying insurance but the assessment for damaged parts is also done through an online process that involves videos and photos. In India, many insurance companies get affected by COVID-19. The Insurance Regulatory Authority of India (IRDAI) declares the decline of the new policy issuance and the lower purchasing power of customers.
COVID-19 has brought out new norms such as work from home. Insurance companies have added new products according to the situation for safety. Insurance companies have started using digitalization for the distribution of insurance products. Also, due to the pandemic, the claim ratio for motor insurance degraded. Whereas, life insurance claims increase in the pandemic.
Due to the ongoing COVID-19 pandemic, most companies have adopted work from home policy. This led to a major reduction in kilometers people drive. The total number of kilometers driven is down by more than 50 percent countrywide. Some of the insurers have introduced usage-based motor insurance during the Covid situation. This allows vehicle owners to insure their vehicle for used kilometers.
Coronavirus makes people strongly believe in buying health insurance to stay away from financial burden. It was about 10% before the pandemic, now it is about a 71% increase in healthcare insurance. So conclusively COVID-19 has brought dynamics in the motor insurance industry along with different areas. And, people have now become quite adjustable with the new normal especially with the implementation of digitalization for every requirement. This can probably be considered as an unforgettable lesson to the people on how to survive in a crisis. This new invention makes people survive in a pandemic as well. What do you think of this?