Car insurance premium may rise in days ahead as the cost of imported spare parts has increased in the recent months because of sharp depreciation of the rupee, say general insurance players.
"Usually, insurance premium is a small percentage of the price of a car. As car prices have gone up due to rise in cost of imported spare parts following the rupee fall, premium may go also up during the time of renewal," Chief Executive of Bharti Axa General Insurance Amarnath Ananthanarayanan told PTI.
The rupee has depreciated more than 20 per cent since May and is hovering around 65 per dollar as of now. This has pushed up costs of imported spares of most of the automakers in the country.
Auto companies like Audi, Mercedes-Benz and BMW among others, which use more imported spares than others due to their lower localisation, have increased prices in the recent months on the back of rising import cost due to sharp rupee fall.
"If the costs of spares go up, this will definitely increase the claim settlements for us. Also, if you see on a six month average, the labour cost has gone up by 10-15 per cent for manufacturers. So, a 15-20 per cent rise in the insurance premium is expected," Managing Director and Chief Executive of Future Generali India KG Krishnamoorthy Rao said.
He also said that given the losses incurred on the third-party motor insurance segment, companies are most likely to pass on the rise in claim cost to end-consumers in other segments like car insurance as well.
An official from the largest general insurer New India Assurance also echoed similar views, but said the increase may happen in the high-end luxury cars.
"The rise in premium may happen in the high-end car segments," General Manager and Whole-time Director at New India Assurance K Sanath Kumar said.
He, however, added the many car companies are likely to absorb the cost increase following the rupee fall due to the subdued demand environment.