Automobile insurance business is among the most sustainable in the present world. Government regulation of making insurance compulsory for all motorized vehicles contributes to the success of this business. This business of covering automobiles against damages could be owned privately, by public sector undertakings, or by joint stock companies. In a country like USA auto insurance business is controlled by public limited companies. The level of competition among these companies is not stiff as the number of entities is less. Further each of these companies is tied up strategically with separate car manufacturers and their dealers for insuring new vehicles.
Insurance for vehicles is done on sale but before the concerned automobile hits the roads. The coverage amount depends on vehicle type, its use, its engine capacity, and seat capacity. If these are same across manufacturers then insurance cost remains same for similar category vehicles. For instance, the cost of insurance for a 4-seated petrol car of 1200 cc of two different makes would be same. Similarly the cost of insurance for trucks of same capacity and type but different brands would be the same.
With the parameters of calculating premium remaining constant there is not much of variation in insurance cost among companies. Further, there is not much of publicity for auto insurance as it is mandatory for all vehicles. Anything which is compulsorily procured or bought does not require too much of a marketing, particularly when service providers are limited. However, in a globalised economy the entrance of more companies in this trade is expected to increase competition. With increased competition it becomes important to devise new tools for attracting more customers. More information on these topics is found in this author’s website.
Probable tips
- Depreciation – Under normal circumstances premium for any automobile is increased every year because of depreciation. As the chances of wear and tear of a used machine increases with its usage so does its coverage cost. Keeping insurance costs unchanged in spite of depreciation is one way of making insurance packages more attractive.
- Discounts – Usually automobile insurance providers offer accidental or loss coverage for a period of one year at a time, to be renewed in successive year. In the event of ‘no claims’ (when there are no accidental damages) during a year, the cost of insurance is discounted for the subsequent term. This discount rate varies from one service provider to another and is a determining factor of attracting more customers.
- Claim settlements – Time required for claim settlement is another vital aspect in boosting auto insurance business. For a car owner the time spent in receiving the settlement amount from the time of notifying damages is crucial. Often companies take a long time in making settlement payments and that too after repeated requests. Lengthy settlement period is a huge turn-off for car owners. To make automobile insurance services more tempting, settlements should ideally be made before a damaged car leaves a garage.
- Simplicity – Formality involved in lodging a complaint is another vital issue determining the acceptability of a motor vehicle insurance provider. The greater the formalities, lesser is the acceptability of an insurance service provider. It is advisable to have a simple and convenient process of lodging a complaint or claim.
- Accessibility – Accessibility is another important determinant of an insurance company’s popularity. Companies with more offices or contact points are naturally more acceptable to end-users. It is common human tendency to approach a service provider which has more visibility.
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