Car Insurance Loyalty - Merits and Demerits

From shopping for garments to household essentials, customer loyalty is something that will be beneficial to a shopper at all times. However, the same cannot be extended to the case of motor insurance. It is often heard that shopping for car insurance at the end of 2 or 3 years is essential to get a policy that yields significant savings. But you should know that staying loyal to your insurance provider can have its own benefits.

Here, we analyse the pros and cons of staying loyal to your insurance company.

Merits Of Car Insurance Loyalty:

Motor insurance companies offer a host of benefits to the customer to make his/her stay worthwhile. The perks offered vary from one insurer to another; however, the benefits offered for extended loyalty are the noteworthy ones. The bundling discounts offered by insurers on multiple insurance products are also variants of the loyalty benefits. Some of the common benefits offered by car insurance companies for customer loyalty are described below:

  1. Lower premium rates - Car insurance companies offer lower rates of premium for customers who have been insured with them for an extended duration. This is one of the most attractive benefits of customer loyalty as far as insurance is concerned.
  2. No Claim Bonus (NCB) - This is a benefit offered by an insurance provider to a car owner who has stayed insured with the company for at least 1 year. The car owner should have also refrained from raising any claims during this time. The percentage of NCB offered increases with the number of claim-free years. The NCB can be utilised at the time of car insurance renewal to get a definitive premium discount.
  3. Other benefits - Although accident forgiveness is a concept that is seen in several countries outside India, variants of this trend is catching up in the Indian insurance space as well. Car insurance companies may not hike the premium following a small own-damage claim, provided the person raising the claim is a long-standing customer. Some car insurance providers may offer to foot the bill for the entire claim amount in the case of minor repairs. Effectively, the car owner will not be required to pay the deductibles.

Demerits Of Car Insurance Loyalty:

It is often found that inertia is a very powerful thing - people feel that it is easier to stay with the same insurance provider than get into the hassles of switching companies. This, coupled with the fact that almost all car insurance companies today have relatively high customer satisfaction figures, makes the switch seem like an unnecessary activity. However, you should know that there are several disadvantages of car insurance loyalty in India:

  1. Insufficient coverage - When you are renewing your car insurance policy with the same insurance company, you should read through the terms and conditions in the new policy carefully. This will ensure that you receive adequate coverage under the new plan. You should keep in mind that your insurance company may alter the coverage under the plan at the time of renewal. So, it is crucial to go through the extent of coverage without assuming that the terms and conditions are the same.
  2. Better prices - In spite of the loyalty discounts you are receiving from your current insurance company, you may find that there is another leading insurer in the market offering you similar coverage at a lower cost. You should study the customer care services, claim settlement history, and reliability of the company before considering a switch.

Points To Remember:

Before switching car insurance companies, keep the following in mind:

  1. Penalties/termination fees - Some insurance providers can charge penalties when a customer cancels his/her insurance coverage before the renewal date of the policy. In case your current car insurance provider charges termination fees, you should ensure that this loss is offset by the savings you gain from switching.
  2. Loss of loyalty discounts - Customers could lose the premium discounts they receive on the basis of loyalty. You should take these discounts into consideration when you are looking to switch car insurance providers.

So Is It Worthwhile To Change Insurers?

The question of whether you should change insurers is based on your individual situation. It is advisable to shop around and get quotes from various insurance providers. There is no obligation for obtaining quotes as this can be done free of cost through neutral financial websites in a matter of minutes. However, when comparing policies, you should take into account the cost of switching and the discounts you will be giving up while implementing the switch.

It is worthwhile to make a switch under the following conditions:

  • The customer service offered by the current insurance company is not up to standards.
  • The turnaround time for claim settlement is not agreeable.
  • The same coverage is extended by an alternate insurance company in the market at a lower cost.
  • Other insurance companies have a vast network of cashless garages and offer attractive add-on covers under motor insurance.
  • There are no significant bundling or loyalty discounts you are enjoying through your association with the current insurance company.

No doubt that lower car insurance premiums and extra discounts are tempting. But these features may not be worth the effort of leaving your current insurance company. You have to do a complete financial assessment and inform your current insurance company in advance, in case you are planning to switch. Informing the insurer at least 30 days in advance can help in ensuring that you get the NCB retention certificate and complete all necessary formalities on time. The insurance company may also offer you a better deal on your insurance, in an attempt to win back your business. This could end up saving you some money; so plan ahead.

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