Will Bharat NCAP programme be a game-changer in lowering car insurance premiums?

The Bharat New Car Assessment Programme (Bharat NCAP or BNCAP) is India’s first indigenous programme for testing and evaluating automobile crash safety. This initiative marks a significant step towards aligning the Indian automotive industry with global safety benchmarks. While this puts India on the map as one of a select few nations worldwide, along with the US, China, Japan, and South Korea, to have a structured car safety evaluation process, will this also impact car insurance premiums? This programme is slated to start from October 1. 

Animesh Das, Chief Underwriting Officer, ACKO, says, “The introduction of Bharat NCAP will make it easier and cheaper for OEM stands for Original Equipment Manufacturers (OEMs) to get their new launches tested and certified. This will have an increase in awareness among consumers and competition among OEMs to design safer cars. Overall, the ecosystem will see more cars eyeing a better Bharat NCAP rating as it will become one of the selling points for an already competitive market. Eventually, this will lead to a reduction in the frequency and severity of accidents and will also start reflecting in the accident data of insurers, potentially leading to more affordable insurance for all.” 

Will Bharat NCAP help in lowering car insurance premiums? For a comprehensive understanding, let’s first comprehend the correlation between vehicle safety and insurance premiums. Insurance premiums are typically determined by the perceived risk associated with a car. Hence, if a vehicle is deemed more likely to be in an accident or be costly to repair, the insurance premiums will be higher. On the other hand, if a car possesses advanced safety features reducing its likelihood of being in an accident, then the insurance premium would be comparably lower. 

So, where does Bharat NCAP fit into this scenario? Providing safety ratings for cars could potentially influence car insurance premiums. A vehicle with a high Bharat NCAP safety rating could be deemed less likely to be involved in an accident, leading to lower premiums. This would incentivize manufacturers to build safer cars and consumers to buy them. 

Das says, “The introduction of BNCAP will make road transportation safer than before. As the accident data starts to build with the insurer, many will see a reduction in the frequency and severity of accidents. This will lead to insurers eventually passing on the benefit to the customers in the form of lower premiums. However, we don’t see any preferential premium pricing system happening right away as the relevant data points in terms of reduction in accidents are not available. However, we expect that a better Bharat NCAP-rated car will be safer than its peer group and it is to the insurers’ benefit to acquire more of such cars through offering more competitive premiums.” 

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Moreover, Bharat NCAP’s rigorous endurance testing methods, which evaluate the car's structural performance and the overall protective capacity of its safety features in the event of a head-on collision, help insurers accurately determine the risk associated with each car model. This precise assessment can also inform and adjust premium calculations. 

Das said, “We believe that cars with better ratings will have a lower risk of accidents, and hence, such customers will be sought after by the insurers. To achieve this, some insurers might launch new policies that attract more customers with high Bharat NCAP ratings, but we will have to see how the whole thing pans out.” 

However, it is imperative to note that this possible correlation between Bharat NCAP ratings and car insurance premiums may not be straightforward. Several factors, including driving history, geographic location, and age of drivers, significantly influence insurance premiums. However, it is reasonable to expect some impact as safety is a crucial factor for Bharat NCAP and insurance companies.