Small cars have higher insurance loss ratio than SUVs

Insurance companies generally tend to believe that SUVs or mini-SUVs would have higher loss ratio and hence they price the premium accordingly, while they overlook the potential of small cars to make claims. But a study has found that SUVs like Scorpio or Fortuner have lesser loss ratio compared to ones like Eon, Alto and Celerio.

As per the data pulled out by PolicyBazaar, SUVs and mini-SUVs demonstrated a very good and profitable loss performance across different models of companies, including Mahindra, Honda, Toyota, Maruti and Hyundai. Creta reported a loss ratio of 32 per cent, Fortuner 45 per cent, Ertiga 52 per cent, Scorpio 60 per cent, XUV 500 62 per cent and Innova 67 per cent.

However, some of the smaller cars like Eon has 86 per cent loss ratio, Alto 70 per cent and Celerio 74 per cent. Among the hatchbacks, Swift reported a loss ratio of 78 per cent, I20 88 per cent, Etios Liva 110 per cent. Some of the sedans too have a higher loss ratio- Amaze 84 per cent, Corolla Altis 104 per cent and Etios 82 per cent.

“The loss ratio among different segments comes as a surprise. Usually, insurance companies believe that the loss ratios of SUVs are higher. But these are SUVs owned by digitally-aware customers who renew the premiums online. Their usage might be different from people who frequently use their cars for long drives. But the pricing is uniform across customer segments,” said Vaidyanathan Ramani, head, Product and Innovations Center,

When it comes to small cars and hatchbacks, the popular notion is that they are mainly for city use, hence insurers tend to price the premiums lower. On lower premiums, the loss ratios become higher.

The study also found that metros had lesser loss ratios compared to their regions. In case of the NCR region, Delhi had an average loss ratio of 66 per cent, much lesser than other parts of the region like Noida with 87 per cent, Faridabad 87 per cent, Ghaziabad 72 per cent and Gurugram 75 per cent. Mumbai had a loss ratio of 48 per cent, much lower than 63 per cent for the whole of Maharashtra.   

“The cars in the cities do not get a chance to over-speed and even if they bump into each other, the severity of the damage is less. That is not the case with cars that ply on highways. Insurance companies have been looking at the regions as a whole in terms of loss ratio. But that is not the true picture,” said Ramani.

The brand of the car too makes a difference. Maruti and Hyundai had lower than average loss ratio of 68 per cent and 72 per cent and some brands like Skoda and Volkswagen had above 100 per cent. “The cars which have higher safety standards tend to make larger claims for replacing more number of parts on damage,’ he said.

PolicyBazaar also found that claims ratio was lesser among customers who bought the policies online on their own compared to those who bought it online with some assistance.

Sangeetha G.