Motor insurance reforms reveal growing consumer discomfort with traditional incentives and restrictions

Insurers are innovating with tools like Kiwi’s ‘Super NCB’ that protect drivers’ bonuses, but complex restrictions and add-ons highlight the importance of informed decisions amid rising floods and claim complexities.

Motor insurers are beginning to redesign one of the industry’s oldest incentives, and that says a great deal about how awkward the usual bargain has become for drivers. On 31 August 2026, Mint reported that Kiwi General Insurance had introduced a “Super NCB” feature that lets policyholders build a no-claim bonus of up to 90% and, crucially, lose only one level after a claim instead of seeing the benefit wiped out altogether. Kiwi said it had sold about 5,500 policies by August, with roughly 98% of customers choosing the feature. The appeal is easy to see: under the standard structure, the no-claim bonus starts at 20% after the first claim-free year, rises to 50% after five straight claim-free years, applies only to the own-damage part of the premium and can be carried to a new insurer at renewal. (livemint.com)

That trade-off helps explain why a low premium, or an apparently harmless claim, can turn out to be expensive. The Financial Express set out the arithmetic years ago in a way that still resonates: if a broken windscreen is claimed under a standard motor policy, the repair may be paid, but the discount at renewal can disappear unless the driver has bought a specific windscreen add-on. In one example, the paper said Royal Sundaram’s own-damage premium for a Swift Dzire ZDi was Rs19,412; a windscreen protector cost about Rs600, yet could preserve as much as Rs5,000 at renewal for a driver with a 50% no-claim bonus. The point is not that add-ons are always worth buying, but that the meaningful price of insurance is the price of the cover plus the cost of the restrictions attached to it. (financialexpress.com)

Flood claims show how quickly those restrictions surface. Mint reported in August 2025 that third-party insurance covers only legal liability to others, while damage to the insured vehicle itself generally requires comprehensive cover and, in some cases, extra protection layered on top. Gaurav Arora of ICICI Lombard told the paper that roadside assistance and engine protection were among the add-ons motorists should consider. Sandeep Saraf of Policybazaar added a practical warning that is more important than any advertised saving: “It’s advisable to not switch on the car it is stuck in flood.” If a stranded car is restarted and slips into hydrostatic lock, he said, the damage may be treated as deliberate behaviour by the owner or driver. Mint also noted that claims can be rejected for something as basic as an inflated or wrongly declared no-claim bonus. (livemint.com)

Business Standard took the same subject further by spelling out the claims mechanics after a flood. Mayur Kacholiya of Digit General Insurance said water entering the engine can cause hydrostatic lock and that such consequential damage is “usually not covered unless you have an engine protection add-on”. Shashi Kant Dahuja of Shriram General Insurance was even blunter: “Vehicle insurance does not cover consequential damage. Hence, ensure you do not start your vehicle engine.” The paper said policyholders should photograph the damage, keep the service centre’s report, retain damaged parts until a surveyor has approved the claim and notify the insurer within 24 to 48 hours. It also noted that insurers reimburse fair costs rather than any estimate a garage may produce, which means haste, poor paperwork or a casual assumption about what is covered can be as costly as buying the wrong policy in the first place. (business-standard.com)

In home insurance, regulation has at least reduced one area of guesswork. The Insurance Regulatory and Development Authority of India’s policyholder guidance says the Standard Fire and Allied Perils policy took effect from 1 April 2021, and the regulator’s broader non-life material describes flood as one of the perils covered under that standard form. That matters because it means flood protection in a standard fire policy is not supposed to be a loosely detachable extra dressed up as a concession at renewal. If a homeowner is being offered a cheaper fire cover, the first question should be whether the policy is still the standard one and, if not, which protections have been carved out. (irdai.gov.in)

Price comparisons, meanwhile, cut both ways. Dealer-linked insurance may promise convenience at the repair stage, especially where an authorised workshop can help assemble estimates and paperwork, but Business Standard reported that buying cover through a car dealer could cost Rs3,000 to Rs20,000 more than buying online, depending on the model. The paper said one reason was straightforward: dealers selling insurance as Motor Insurance Service Providers add a commission layer that an insurer’s own website or an online aggregator may not. It also cited comments by the then IRDAI chairman, Subhash Chandra Khuntia, expressing concern that some insurers might be paying higher commissions to these providers than the regulator permitted. Convenience, in other words, may be valuable, but it should not be mistaken for a bargain. (business-standard.com)

The sensible insurance buyer is therefore not the one who simply chases the lowest renewal quote or files every admissible claim. It is the one who asks what will happen after the first mishap: whether workshop choice is limited, whether engine protection or roadside assistance has been stripped out, whether a no-claim bonus can be preserved, whether a small repair is cheaper to pay for privately, and whether a sales discount is merely a different bundle of cover in disguise. Kiwi’s recent bet on preserving more of the no-claim bonus suggests insurers understand that customers dislike discovering the real cost of a “saving” only after damage has happened. Buyers would do well to adopt the same realism before they sign. (livemint.com)