Nano insurance to cost more than M800

Tata Nano may be the world’s cheapest car but the insurance cost of the Rs 1,00,000 wonder would be far from being cheap.

General insurers feel that the motor insurance premium on the Nano is likely to be more than Rs 3,500, which is higher than the premium for Maruti 800 (non-AC), the closest comparable car in terms of price. The first-year premium for a Maruti 800 (non-AC) is around Rs 3,000.

Insurance companies are still working out the details of premium for the Nano.

Premium is calculated by taking into consideration the value of the car and its engine capacity. Insurers said premium also depends on the price of spare parts. Even if the spare parts are cheap, there are fixed administration costs and survey expenses that cannot be reduced.

Also, premium would depend on road-worthiness of the car. Other factors such as commission expectation from intermediaries is also likely to be factored in. A senior official of a leading general insurance company, who did not wish to be named, said, “The insurance cost would be closer to the premium charged on Maruti 800. The premium calculated would be at basic rate (3 per cent) multiplied by the value of the car. Plus Rs 800 for the insurance cover for third-party claims of a small car is fixed by the regulator.”

N Eswaranatarajan, head-motor insurance of ICICI Lombard General Insurance, said that his company was still working out details of insurance cover. “It would be too early to give the exact cost,” he said.

Insurers are also expecting a boost in sales of motor insurance policies. General insurers expect an additional business of 5-10 per cent from Nano.

S Narayanmurty, senior vice-president (underwriting & product development), Bharti AXA General Insurance, said, “The launch of Nano with its projected high sales volume will definitely create a positive impact on motor insurance market.”

Due to the economic downturn, business for general insurance companies has been affected. Industry players look at the Nano launch as an opportunity to boost motor insurance sales. Motor insurance accounts for more than one-third of the overall business for general insurers. For ICICI Lombard, one of the biggest private players in the general insurance space, motor insurance accounts close to 65 per cent of their total retail business