The overall growth of the two-wheeler market is on a rise since the last few decades. However, the same trend is not reflected in terms of two-wheeler insurance market as more than half of the policies are not renewed after the first year mandatory coverage. As the insurance policy comes attached to the new vehicle, there is no way in which customers can avoid buying insurance for their two-wheelers. In this article, we will explore will long-term two-wheeler insurance make any difference to the insurance industry.
Current Situation of the Insurance Industry
There is huge competition among the service providers and more and more companies are entering the market every year. While every company is able to make good progress when it comes to issuing policies for new vehicles, they are not having an impressive record when it comes to renewals. Most of the marketing expenses are spent towards attracting people for renewal of policy and a major portion of the staff is dedicated for this purpose. The companies try their best to get the renewal done before the expiry date and they even intimate the customers about this renewal. However, it is proved through statistics that more than half of the policyholders do not go for renewal after the first year. This figure goes down further for the consecutive year renewals. In this regard, drastic measures are needed to improve the renewal rate in the industry. This dismal figure is seen across the country even though it is mandatory to have insurance for every running vehicle in the country.
How Long-term Insurance Plans affect Insurance Industry?
The long-term insurance plans not only benefit the policyholders but also the insurance providers in many ways. Many two-wheeler insurance companies struggle when it comes to convincing the customers for renewing their insurance policies. Even after sending reminders and calling the customers to information about renewals, the companies are not able to get a good response in many cases.
Here are the benefits of long-term insurance plans:
1. Threat of Policy Discontinuation is Reduced
The biggest threat for any insurance company is not being able to get renewals from the policyholders. Even after spending lots of money on promotional activities, more than half of the policies are not getting renewed as per current trends. With long-term insurance plans, the policy remains active for a longer period of time.
2. Companies get Bulk Premium Payment
The insurance companies get premium at once for the entire duration of three years. In this way, their earnings are secured for three years without worrying about annual renewals.
3. Companies can offer Affordable Plans
The insurance service providers also pass on some of the benefits of receiving advance premium payment to the customers. When they sell three-year plans, they usually sell them at a lesser price when compared to the regular plans that offer insurance coverage only for one year.
4. Less Marketing Expenses
You need to understand that many insurance companies spend a major portion of their income on promotional activities. This is done in order to get proper renewals at the right time from customers. With long-term insurance plans, less money is spent on marketing.
5. Reduced Paperwork for Covering Vehicles
As there is no need to renew the policy every year, the paperwork required for the renewals reduces by a huge margin. Once they sell a long-term policy, insurers need not worry about it for the next three years.
6. More Participation in the Long Run
Since long-term vehicle plans are beneficial for both the insurance buyers as well as the insurance companies, this is likely to increase participation among the general public. In this way, the overall growth of the two-wheeler insurance market will witness positive growth in the near future.
Over to you
In this way, the multi-year insurance plans have the potential to change the insurance sector in future. This means that policyholders need not worry about frequent renewals and they will get tied to the policy for a longer duration as against the single year plans. The biggest advantage is that insurance buyers don’t have to renew their policy on a yearly basis and they get to save money on the insurance premium as well.