People buying car insurance policies after February would get a lesser refund from insurance companies, if they go for a claim in case of painting vehicles. This is because the Insurance Regulatory and Development Authority has decided to bring the expense of getting your car painted under the depreciation head.
When a vehicle repair or maintenance goes under the depreciation head, the insurance company deducts a certain percentage in refunding the claim, and the vehicle owner has to pay the balance. At present, insurers bear the entire cost of painting a car in case of a claim, which would get reduced in case of policies that begin after February 2013.
Existing policyholders would not be impacted by this norm, but policies sold after February 1 would come under the purview of this change. Also, the new rules would be applicable only to cars, which are less than ten years old.
Amarnath Ananthanarayanan, managing director and chief executive officer of Bharti AXA General Insurance, says, “In case of physical damage to the car, the cost of painting can make up for 50 to 60 per cent of the total cost.” Painting a car bumper or a panel can cost you anything between Rs 3,000 to 4,000. This depends on the area and the extent of damage. For high-end luxury cars, this cost would rise by 50 per cent or more.
How much of the paint cost you would be able to recover depends on the bill you produce. Typically, you either get a bill showing a break-up of paint and labour charges or a consolidated amount without the break-up. Under the new rules, if you produce a bill with the break-up, you would attract a higher depreciation deduction at 50 per cent on paint cost. And, if you don’t have a break-up, you would pay only 25 per cent as deduction.
Say, your car meets with an accident and you get a part of it painted. The total bill stands at Rs 1,000. And the bill shows paint material cost as Rs 400 and labour charges of Rs 600. As the cost of paint is separated from the labour cost, you will pay depreciation at 50 per cent of paint cost (Rs 200) while the entire labour cost (Rs 600) incurred will be refunded. This means, you will get back Rs 800.
If your bill does not show the break-up of paint and labour charges, you will pay a depreciation of 25 per cent on the bill amount and the remaining 75 per cent will be reimbursed to you. If your total cost is Rs 1,000, you will get back Rs 750.
Including paint under the depreciation head, means the cost for the insurance company gets reduced to that extent, while the policyholder pays more. However, it is unlikely that the insurance company will pass on this benefit (may be through discounted premiums) to policyholders. Insurers say, the cost of spare parts is rising and the incidence of claims is increasing.
Sanjay Datta, head of claims and underwriting at ICICI Lombard, says that typically such claims are not huge in amount. He adds: “You should not claim such expenses as claiming for any expense against your motor policy will impact your no-claim bonus. And no-claim bonuses give a better discount in premium on renewal every year. You can get your premium lowered by 40 to 60 per cent in the long run.”