Your car insurance claim is about to lose some paint

Next time your car bumps into something and you make a claim, chances are the insurer will deduct a higher amount.
That’s because the Insurance Regulatory and Development Authority (Irda) is considering bringing painting expenditure under depreciation head.

“The paint shall be included in the category of rubber, nylon, plastic parts, tyres and tubes, batteries and air bags, which attract 50% depreciation, as paint material is polymer based and hence the depreciation as applicable to plastic parts can be applied, “ the regulator says in an exposure draft.

Currently, insurers bear the entire cost of painting a car in case of a claim. Should the regulator’s proposal become the rule, you would need to bear a good part of the cost.

In this case, the depreciation rate will be only 50%, though this can be applied only to the material cost, which cannot exceed 35% of the total cost.

To give you an example, if the painting cost is `100, depreciation will be levied on a maximum of Rs35. Your 50% share of this would work out to Rs17.5. The hit would be significant, say experts, given that painting cost makes up about 55% of the total claim payout on the repair front.

Insurance companies have long been complaining that the bills for painting in case of high-end luxury cars are pinching them. Even for a small dent, customers generally ask for the entire car to be painted, which ends up escalating the cost.

Predictably, industry players have hailed the move. KG Krishnamoorthy Rao, MD & CEO, Future Generali, said this will come as a huge respite to the insurance companies which have been shouldering the burden even as the paint and painting costs keep mounting.

Jagdish Bhat of Risk Care Insurance Broking Services said this will also help in making the claim insurance procedure more standardised. He pointed out that some insurance companies had already started treating paint under a deductible cost and this was leading to discrepancy.

But there may be a silver lining in the cloud.
Vijay Kumar, head of motor insurance at Bajaj Allianz General Insurance, sees this move bringing down the car insurance premiums in time to come. “Now that the customer will be sharing additional cost with the insurance companies, we can look at passing the benefit on to the consumer. One can either pay high premium and not share the burden or vice versa, “ he said.

This could mean those who don’t make a claim may be able to enjoy a lower premium than those who do. But of course, companies will take this decision only if the claim ratio in case of own damage comes down.