Purchasing a car or motorcycle is often a significant milestone for individuals. Typically, the primary focus revolves around factors such as the cost, the specific model, and the anticipated delivery date.
During this process, insurance tends to become overshadowed, merely considered as another item in the overall bill. It is usually integrated into the “on-road price,” given a brief explanation, and seldom subjected to scrutiny.
Consequently, many buyers find themselves paying more than necessary or, worse, acquiring a policy that fails to provide comprehensive protection.
THE COMPLEXITY BEHIND PURCHASING INSURANCE AT THE DEALERSHIP
Upon vehicle delivery, most buyers are informed that insurance is an integral part of the process. In some instances, there is a subtle pressure implying that buying insurance from the dealer is essential to prevent future complications with claims or servicing.
However, this notion is misleading.
According to Saurabh Vijayvergia, the founder and CEO of CoverSure, the issue largely stems from how insurance is marketed during the point of sale. “Many buyers rely heavily on the dealer’s guidance for a high-value purchase, while insurance becomes an add-on driven by commissions within an OEM-broker setup.”
In essence, insurance is often presented as a product to be sold rather than a decision to be carefully considered.
THE MOTIVATION BEHIND DEALERS PROMOTING THEIR OWN INSURANCE POLICIES
The primary incentive is financial gain.
Dealers earn commissions on insurance policies sold through their channels. As buyers are already engaged in a substantial transaction, insurance emerges as a convenient add-on.
Vijayvergia elucidated that this disparity leads to a lack of transparent information. “A buyer might be quoted an on-road price of Rs 10 lakh, inclusive of an insurance premium of Rs 45,000. A similar policy available in the open market could cost Rs 30,000–Rs 35,000 or offer superior coverage, but the discrepancy is often camouflaged with ‘free’ supplementary items like accessories.”
Consequently, buyers encounter challenges when attempting to compare or question the insurance policy.
The prevalence of this issue is evident in data as well. The Insurance Regulatory and Development Authority of India’s (IRDAI) Annual Report 2024–25 highlighted a 14.3% surge in complaints related to unfair business practices, including mis-selling at the point of sale.
STRATEGIES TO MASK THE TRUE COST OF INSURANCE POLICIES
A common tactic is to make the premium appear appealing upfront.
Vijayvergia pointed out that dealers frequently employ “premium compression” techniques. This involves reducing the visible cost while compromising the policy in ways that become evident later on.
An example includes reducing the Insured Declared Value (IDV), the maximum claimable amount in case of theft or total damage. Although a lower IDV marginally decreases the premium, it could potentially reduce the claim amount by Rs 50,000 to Rs 1 lakh or more.
Another approach is to introduce high voluntary deductibles, decreasing the premium marginally at present but escalating the out-of-pocket expenses during a claim.
Certain essential add-ons like engine protection or consumables cover may be omitted to maintain a lower price.
<p data