Wednesday , 20 November 2019
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Safety ratings for cars could affect insurance premiums

By Deepak Yohannan
Earlier this year, an independent testing agency based in the United Kingdom carried out crash tests on small cars that are popular in the Indian market—including such brands as Maruti Alto 800, Volkswagen Polo, Hyundai i10, Tata Nano and Ford Figo. The tested cars tested exceptionally badly in the crash tests, leading the agency, Global NCAP, to declare that four out of five popular small cars currently plying on Indian roads did not meet international crash-test safety norms.
Given the sheer population of small cars on Indian streets, such figures are chilling. They also bear testament to the fact that the Indian car buyer does not pay much (if any) heed to safety when shopping for a new set of wheels. Most of us focus instead on other factors, such as pricing, fuel efficiency, and overall design. Moreover, unlike developed countries, India lacks crash-testing facilities, which means that crash safety norms are still some distance away. However, there is talk of introducing a star rating system to measure car safety in India.
What is this star rating system?
The star rating system would be a stopgap until full-fledged crash testing begins in India. The system would rate cars based on their safety features. The proposed safety ratings would be a gain for customers as they would finally be able to evaluate cars based on safety. Simultaneously, especially as customer awareness about the safety ratings increases, it would put pressure on car manufacturers to introduce more safety features in their models.
Furthermore, in developed countries around the world, the owners of high-safety cars typically pay lower premiums Once the proposed safety rating system comes into effect in our markets, it is likely to be linked with how much we pay by way of car insurance premium. This, in turn, will encourage our cost-conscious customers to opt for safer vehicles.
Why would safety ratings lead to lower premiums?
A safer car is less of a risk to your insurer. It is less likely to be in an accident and, therefore, the owner is less likely to claim against his/her policy. Since the insurer’s financial risk is lower on such a car, they profit more on these policies. Hence, they reward the owners of safer cars by lowering the insurance premium. Similar reasoning leads insurers to charge lower premium from the owners of cars fitted with anti-theft devices: These cars are less likely to be stolen and, therefore, the owner is less likely to file a claim. Safety ratings would allow the insurer to charge less in the case of a safer car and more in the case of a less safe model.
Make your car safer. Pay lower premium.
Note, however, that the safety rating system is still at the proposal stage. It may be quite some time before customers are able to compare cars based on safety. Until then, we as customers can take additional steps to increase vehicular safety and get discounts on our premium amounts. Airbags are an obvious choice. Replacing a deployed airbag may be expensive, but is a worthy investment to make in terms of safety. Auto-braking systems are another good add-on as are backing up sensors.
(The author is the CEO of MyInsuranceClub.com, an online insurance price and features comparison portal. You may contact him directly on Twitter: @dyohannan)

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