Car insurance renewal in India is often viewed as a last-minute formality. Even with the legal requirement under the Motor Vehicles Act that mandates third-party insurance for every registered automobile, about half of the vehicles on Indian roads are uninsured or running with a lapsed coverage, as per a survey by the General Insurance Council. This persistent issue exposes motorists to various legal & financial risks, but it also creates opportunities for insurers, OEMs, and policymakers.
Here's a closer look at the current trends around motor renewals.
Widespread Compliance Gaps
Despite strict traffic enforcement, many motorists overlook their policy expiry. Driving with an expired policy can lead to fines of up to Rs. 2, 000 (or more in frequent offences), as well as the risk of having the vehicle impounded- yet not the biggest concern.
The larger risk is the financial exposure in case of an accident, injury, or theft during a lapse, which can create liabilities that outweigh annual premiums. On the other hand, missed renewals have a direct impact on churn rate and CAC (Customer Acquisition Costs) for insurers. This is due to the loss of customers and increased need to spend more on acquiring new ones.
Why Timely Renewal Matters?
Beyond the legal requirement, timely car insurance renewal has these practical benefits:
- No-Claim Bonus (NCB): If you do not make any claim during your policy term, you become eligible for NCB, which is a reduced premium price at the time of policy renewal. The NCB amount can go up to 50% for 5 consecutive claim-free years. But, you should renew within 90 days of its expiration; otherwise, your NCB resets to zero.
- Uninterrupted Protection: Any coverage gap can put you at financial risk in the event of an accident or vehicle theft.
- Loyalty Discounts: Many insurance companies reward vehicle owners with reduced premiums and value-added services on timely renewals.
From the insurer's viewpoint, keeping insurance coverage active is crucial. It ensures stable revenue, more accurate prediction of risks, and a reduced dependency on fresh acquisitions.
Motor Renewal Trends: The Shift to Digital
Over the past three years, there has been a substantial rise in the adoption of car insurance online. An increasing number of consumers are choosing digital-first renewals. Here is the data:
- Tier-2 adoption rate rose to 70%.
- Tier-3 cities witnessed an increase of 110%.
Insurance aggregators, InsurTech apps, and embedded fintech tools have simplified the customer journey by enabling quick renewals with minimal documentation. Consumers can now compare quotes from multiple insurers, access exclusive online discounts, review or customise add-on covers, and pay securely and receive policy instantly.
Compared to offline renewals, this transition reduces distribution costs for insurers by up to 25–30%, enabling better customer profiling.
Simplified Renewals for Consumers
No matter if you choose to renew with your existing insurer or switch to a new one, it's all straightforward:
- Provide Vehicle Details: Visit the insurer's or aggregator's official website and enter your vehicle's registration number or previous policy number.
- Review IDV: IDV (Insured Declared Value) is your vehicle's current market value, and it directly impacts your premium price.
- Check for NCB: Make sure that your NCB discount (if applicable) is correctly applied.
- Select Add-ons: Consider add-ons for enhanced layer of protection. Some of the most valuable ones are zero depreciation, 24x7 roadside assistance, engine protection, return to invoice, etc.
- Premium Payment: Securely pay premium online.
- Download Policy: Your policy is valid immediately, and you can use the soft copy anywhere across the country.
Note: For expired policies, a vehicle inspection might be required before renewal, particularly if it has been more than 90 days since the policy lapse.
Rising Popularity of Add-ons
Currently, average comprehensive insurance premiums in India range between Rs. 10, 000– Rs. 20, 000 annually. These depend on the vehicle's make & model, engine capacity, fuel type, age, and city, and the type of coverage.
Most sought-after Add-ons:
- Zero Depreciation: Complete claim amount without factoring in vehicle depreciation.
- Return to Invoice (RTI): Full settlement of the invoice value in case of total loss or theft.
- Engine & Gearbox Protection: Highly helpful during monsoon season in areas prone to floods.
- 24×7 Roadside Assistance: Offers emergency assistance in case of a breakdown; fuel delivery, towing, battery jumpstarts, minor repairs.
A car’s engine capacity has a significant impact on its insurance price. Recently, the government of India has proposed a two-tier GST structure for automobiles- 5-18% and 40% slabs. This is in view of the classification disputes related to the engine capacity and vehicle size. Under this framework, a single category is likely to be created for vehicles with an engine capacity of less than 1200cc. There will reportedly be a separate & higher-tax bracket for vehicles with engines above 1200cc.
Once implemented, small cars could reportedly see their GST rate decreased to 18%, which will be a significant reduction from the current 28% plus cess. Consequently, the insurance premiums for cars are also likely to be reduced.
Consequences of Missed Renewals
Here is the severe fallout of missing renewals:
- You lose your accumulated NCB if the policy isn’t renewed within 90 days of expiry.
- Your vehicle might undergo a physical inspection before renewal.
- Increased premium amount due to vehicle re-evaluation.
- You risk driving uninsured, which is not only illegal but financially critical.
Tip: While many insurers send renewal reminders, you can also set calendar alerts to help you keep track.
Smart Renewal Tips for Consumers
For both consumers and insurance providers, renewal is a chance to optimise coverage and improve services.
- Avoid Auto-Renewal: Before you renew your policy, compare policies online, their pricing, features, & benefits.
- Check Insurer's CSR: Prefer insurers with over 90% Claim Settlement Ratio (CSR).
- Usage-Based Insurance (UBI): Drive less? Opt for PAYD (Pay as you drive) insurance. Under PAYD insurance, you only pay only for the number of kilometers you drive.
- Avoid Small Claims: If affordable, paying minor repair costs out-of-pocket helps retain your NCB.
Motor Insurance Portability: A Hidden Benefit
Yes, you can switch insurers during your renewal without losing your benefits. Your NCB travels with you as long as you provide proof of claim history, giving you more flexibility to find better pricing or benefits.
The Impact of Renewals
- For Insurers: High renewal rates mean lower acquisition costs, increased profitability, and better solvency ratios.
- For OEMs: Bundled renewals strengthen after-sales engagement with consumers and boost workshop loyalty.
- For Regulators: IRDAI’s push for UBI and digital KYC can make renewals more seamless & accessible.
Motor insurance renewal is more than a task on your to-do list; it's a great chance to take a closer look at your coverage, explore potential discounts, and make sure that you & your vehicle remain financially secured. Whether you drive daily through urban traffic or hit the road only on weekends, make sure to renew your car insurance on time. It's all about keeping you and your vehicle protected for a worry-free driving experience.