Fuelling Insurance Costs

Planning to do away with your petrol car for a diesel one? Remember that while you may save on fuel costs, the change would spell higher insurance premiums.

KEY POINTS

• The motor insurance premium would go up when you move from a petrol vehicle to a diesel or CNG one. While there is no standard differential and the actual premium varies by model and insurer, typically, there is a 10-20 per cent increase in the own damage premium for a petrol car versus that for a diesel, LPG or CNG car.
• The accumulated no-claims bonus does not change if the old petrol car is exchanged for a new diesel/LPG/CNG car. What does affect the NCB transfer eligibility, however, is a function of the cubic capacity (CC) of the engine of the current car and the new car.

The disagreement that dogs the motoring industry is about diesel engines versus petrol engines. The tiff between the two is indeed never-ending. Which one is cheaper? Which is greener? Which ensures a smoother ride? One could go on.

While several of these questions are still unanswered, some industry experts say that if you drive more than 40 km per day (1200 km per month), a good way to save money on fuel could be to exchange your old petrol car for a diesel, CNG or LPG one. Another strategy adopted by consumers is fitting a CNG or LPG kit in their old petrol cars. While such moves will definitely help to cut down fuel costs, be forewarned that the cost of maintenance of your car is sure to increase.

In addition, the motor insurance premium too would go up when you move from a petrol vehicle to a diesel or a CNG one. While there is no standard differential and the actual premium varies by model and insurer, typically, there is a 10-20 per cent increase in the own damage premium for a petrol car versus that for a diesel, LPG or CNG car.

Hence, if you are one of those contemplating a shift from a petrol car to a diesel, LPG or CNG car, here are some of the parameters that merit consideration:

A) Fuel Type And Premium - Higher premiums for diesel cars are driven by the fact that diesel cars of a comparable model are more expensive, and hence, the Insured’s Declared Value (IDV) is higher. Moreover, people buy diesel cars for more usage, and hence, insurance companies bracket them in the high insurance category.

Additionally, as the usage of vehicles running on CNG/LPG is high, it has been observed that the chances of an accident involving them are high as compared to petrol vehicles. Certain parts of nonpetrol cars are also more expensive than those of petrol cars, which also increases the cost of insurance.

B) NCB Transfer Eligibility- If individuals do not make claims on the motor insurance company, they are rewarded with a no-claims bonus (NCB). The accumulated NCB does not change if an old petrol car is exchanged for a new diesel/ LPG/CNG car. What does affect the NCB transfer eligibility, however, is a function of the cubic capacity (CC) of the engine of the old car and the new car. If the CC of the new car engine exceeds a certain limit in comparison with that of the old car, the policyholder will not be eligible for the NCB transfer.

As a ballpark, if you own a vehicle of upto 1000 CC and upgrad to a vehicle of 2000 CC, you can carry the NCB forward. However, if the new vehicle is anything higher than 2000 CC, the benefits are not transferrable. The reasoning given for this by insurance companies is that there is no certainty about whether the driver will exhibit the same discipline in driving a much bigger car with a much higher CC.

If you fit an external LPG or CNG kit, you can carry the NCB for the new car forward. However, the premium charges will be hiked as per the existing stipulations. As part of the procedure, when you get an LPG or CNG kit fitted, you also need to intimate the insurer in writing immediately. After getting this endorsed in the RC of the vehicle, the insurer may conduct an inspection.

If there is any change in the risk perception of the vehicle, the difference has to be communicated to the insurer, and additional premium will be levied. If the policyholder fails to inform the insurance company about the change in fuel type of the car, the claim may be rejected when the time comes.

With a difference of over `30 between petrol and diesel prices, many people have been induced to exchange their old petrol car for a diesel one or simply to buy a new diesel variant. Some of the other reasons why you may opt for diesel variants are that diesel cars are more fuel efficient than petrol versions, and offer more mileage. Besides, the diesel prices in the country have been frozen for almost a year now due to political compulsions, which has made diesel a lot cheaper than petrol.

So, if you are planning to buy a car immediately, bear in mind that a non-petrol car means higher insurance.