In an attempt to remain in the driving seat during the economic downturn, car insurance companies have cut their car insurance premiums by 20-40% to stay popular in the shrinking car market, it has been revealed.

Indian car insurers are being forced to increase business volumes by offering huge discounts, especially for policy renewals, with premium collection falling by around 60% due to fewer car sales and lower tariffs. Overall, car premium collections have decreased by 20-30%.

“Market competition is prompting general insurers to offer discounts on car insurance renewals. We are giving around 20% discounts on certain models,” marketing director NK Kedia said.

However, it is thought that the price war may come to an end with premiums reaching unrealistically low levels: “A price war usually follows the freeing of tariffs globally. That's what has happened in India. Premiums have fallen sharply, but we could be close to the bottom. Our sense is that markets may harden in the next six months,” says Oriental Insurance general manager NK Singh.

Car insurance is compulsory for drivers in India and the sector has witnessed a 30-40% increase in third party coverage, whereas own damage cover has fallen by as much as 40%.