Adventures of buying insurance policy for a new car purchase

In the last week of December I bid farewell to my tried and tested Honda Civic and purchased a new car. I was hoping for a smooth ride as most cars (I was looking at SUVs) that I was considering were available off the shelf at attractive discounted prices. Little did I realise that my journey to acquire a new car would give me enough material to fill two columns in this news paper. Here is Part I of my adventures in buying the new car. This part deals with my adventures with the car insurance companies.

I had never made any claim on the insurance policy on my Civic and hence was getting a 50% no claim bonus (meaning I was given a discount of 50% on the premium as a reward for not making any claim under the policy). I wanted to transfer this discount eligibility to the insurance policy of the new car. In simple English it meant that I would have to pay only around Rs 24,000 as the premium for a comprehensive car insurance policy for the SUV instead of the normal amount of around Rs 45,000 that I would otherwise pay – a substantial saving of around Rs 21,000 in the first year itself with significant savings in the future as well.

That's where I hit my first hurdle. Now you cannot transfer the no claim bonus to another insurance policy without either first cancelling or transferring the old policy to the buyer of the old car. My Civic was bought by a used car dealer who in turn would re-furbish the vehicle and sell it off in the market. In the used car market it is usual market practise for the seller to sign off transfer documents with blanks in the space earmarked for the buyer.

This enables the used car dealer to fill in the name of the ultimate buyer at a future date. In short the ownership of the old car is in a state of limbo for a few days/weeks till the ultimate buyer is found and he chooses to register the car in his name. That would have been fine by me as I had already been paid for the car (and had sufficient documents to evidence sale and delivery of Civic to the used car dealer) but for the fact that my insurance policy also goes into a state of limbo. I therefore negotiated with the used car dealer that I would not be transferring the insurance policy but would be cancelling it. He was okay with that. I thought my troubles were over and that I would soon get the insurance policy for the SUV. The SUV could not be registered without the insurance policy so getting the policy became of paramount importance. That is when I discovered what I had let myself into.

The insurer who had issued the policy for the Civic (let's call them as Insurance company B) refused to cancel the policy on the old car claiming some Supreme Court decision preventing them from doing so. They offered that I could cancel the comprehensive part of the policy and retain the compulsory third party insurance. But to part cancel the policy and get a certificate from them that I had made no claim on the policy was a manual process for which I would have to visit their branch and I was told that the whole process would take at least 10-15 days. I was not willing to wait that long and decided to shop online. I visited various websites and responded to various online advertisements offering car insurance policies. The initial response from each insurance company was extremely enthusiastic but none of them offered the facility of transferring the no claim bonus to the new policy. Each of them including insurance company B (who was aware that no claim had been made on the policy) said that they would issue the policy for the full premium payment of Rs 45,000 and that I could claim refund for the no claim bonus later by submitting the certificate from Insurance company B. I knew it would be a hassle to get refund from an insurance company later on and hence was looking for a way to get the new policy without having to pay a higher amount up front. I contacted a very competent agent of insurance company B who assured me he would get the no claim certificate from the insurance company B in a jiffy and a policy for the SUV at the net premium rates from the same company within 2-3 days itself. He tried his best but even with his connections he could not get the work done. Meanwhile it was first week of January and I needed the vehicle as I had a wedding in the family on January 30, so I was getting desperate. So I decided to use pull and spoke to a senior person in insurance company B who as a special case allowed the cancellation of the old policy based on my email and got the new policy issued for the net premium amount.

I thought my struggles were over after I sent the policy document to the car dealer (this was January 12) and that I would get my car within a few days. More about that later. But to return to the insurance company. It is unbelievable that in this internet age the insurance companies cannot complete the process of cancelling the insurance policy online and issuing the necessary no claim certificate within a couple of days. In fact it could simply allow payment of the pro-rata amount of no claim bonus on the old policy and issue a certificate accordingly. My requirement is not anything unique and with the number of car buyers who are buying new cars after selling their old cars is increasing. This sort of easy portability of the no claim bonus will be in consumer interest.

Like the telecom regulator this is one area where IRDA needs to intervene and make sure that this portability process is made smooth and easy. After all it is in the interest of the entire industry to give a good deal to non claim making consumers. Meanwhile my learning is that if you buy the policy from the same insurance company who had insured the old car there is a better chance of getting advantage of the no claim bonus in the premium itself.

Meanwhile watch this space for the next installment of this two piece article on whether I could get delivery of the car before the family wedding on January 30.

Harsh Roongta, director, Apnapaisa