Insurance can often become an overlooked aspect of purchasing a vehicle, with many buyers focusing primarily on the car’s price, model, and delivery date. When it comes to insurance, however, it usually gets bundled into the overall cost without much scrutiny. This oversight can lead to buyers inadvertently paying more for subpar coverage.

At the point of vehicle delivery, buyers typically receive assurances that purchasing insurance through the dealership is part of a seamless process. They may feel pressured into this choice under the impression that it is essential for smooth servicing and claims, a notion that Saurabh Vijayvergia, the founder and CEO of CoverSure, states is misleading.

Vijayvergia highlighted that the dealership’s model treats insurance as a mere product to be sold rather than a crucial decision that requires thoughtful consideration. Buyers often depend on the dealer’s advice during an important purchase, leaving them vulnerable to potential oversights regarding insurance costs and coverage options.

Reasons for Dealer Recommendation of In-House Insurance

The primary motivation for dealers to recommend their own insurance policies lies in the financial commissions they earn from these transactions. By integrating insurance into the purchasing process, this simplifies the sale in the eyes of buyers but obscures the potential for better options available elsewhere.

Vijayvergia pointed out that this situation creates a lack of transparency. For instance, if a buyer is quoted an on-road price of Rs 10 lakh, this amount often includes an insurance premium that is considerably inflated. The same coverage might be obtainable for Rs 30,000–Rs 35,000 when sourced independently, which diminishes the buyer’s ability to make informed comparisons.

Data from the Insurance Regulatory and Development Authority of India (IRDAI) further substantiates these claims, as the Annual Report for 2024–25 noted a 14.3 per cent increase in complaints regarding unfair business practices, which includes alleged mis-selling at the point of sale.

Misleading Pricing Tactics in Policy Sales

One prevalent method dealers employ includes making insurance premiums appear significantly lower than they are through various tactics. Vijayvergia described “premium compression” strategies wherein the visible price of the insurance is reduced, yet the policy itself is weakened in ways that may not be apparent until the time of a claim.

For instance, lowering the Insured Declared Value (IDV) can initially reduce premiums but may lead to considerable losses during a claim. Buyers may find themselves discovering later that their claim amounts are substantially lower than expected due to these reductions. Additionally, imposing higher voluntary deductibles can also lower upfront costs but increase out-of-pocket expenses during a claim.

In many scenarios, essential protections such as engine cover may also be excluded to keep the quotation looking competitive. Such practices shift the risk burden onto the buyer while presenting a façade of affordability.

Legal Requirements and Independent Options for Buyers

Despite perceptions, it is not mandatory for buyers to purchase insurance through the dealership. Motor insurance is indeed required by law, but acquiring it independently is entirely permitted. Vijayvergia emphasised that choosing insurance separately provides buyers with the freedom to explore various insurers and tailor coverage to their particular needs.

Shilpa Arora, co-founder and COO of Insurance Samadhan, reinforced this perspective, urging buyers to realise their options available to them beyond in-house policies. The lack of discussion regarding the No Claim Bonus (NCB), an essential benefit linked to the policyholder rather than the vehicle, often leads customers to miss out on discounts when transitioning to a new policy.

To safeguard against costly mistakes, experts recommend taking the necessary time to compare policies, scrutinise coverage details, and ensure critical components such as the NCB are transferred effectively. Insurance decisions should not be made hastily, as proper understanding and evaluation are crucial for securing suitable protection for vehicle purchases.

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