Saturday, November 29, 2014

Are you really getting free insurance as offered by Automobile Companies in their advertisements

Whether advertisements like "Free Insurance" not misleading advertisements?

Now a days there is flood of advertisements by Automobile companies offering free insurance. Even there is a recent  advertisement which offers free insurance for 3 years. Now lets see whether it is really a free insurance or is being paid by you and still you being mislead through such advertisement.

1. One of the condition for any product to be covered for insurance is payment of premium. Hence there is no term like free insurance. Insurance is a matter of risk and no risk is covered unless and until a premium is paid.
2. I have every reason to believe that the prices are build up with insurance premium and offered to buyer as free insurance. I have negotiated with the dealer who offered free insurance at the first instance and then later on agreed to give an amount of Rs. 18,000/- if I do not accept their offer of free insurance. It clearly proves that the price of the car was built up with the insurance premium and then offered you as "Free Insurance". There were three options which were offered:

a) Net cost payable If the vehicle is purchased with 3 years free insurance        : Rs. 4,70,845/-
b) Net cost payable if the same vehicle is purchased with 1 year free insurance: Rs. 4,58,916/-
c) Net cost payable if the same vehicle is purchased with no free insurance       : Rs. 4,40,916/-

It is very much clear that customer is paying insurance premium of Rs. 18,000/- in the first year despite the advertisement claiming free insurance.
3. The companies are offering such insurance through private insurer. 
4. If the prices are build up with insurance premium and offered you as free insurance, the buyer does not have any choice to subscribe the insurance policy with the company of buyer's choice..
5. Now when the buyer is being offered free insurance, most of the buyer are to forego the no claim bonus arising out of their previous policies. This would make buyer at a loss in the long run say after 2-3 years. 
The advertisement is misleading as the customer is being misled by offering something free which is not a fact. Those buyers who are selling their old vehicles and intend to buy new vehicle should ask dealers to offer discount equivalent to that of insurance premium. The buyers in such cases would be able to subscribe the policy for new vehicle with insurance company of their own choice with No Claim Bonus ( NCB ) which would enable them to save more in the 2nd year onwards.There is another aspect involved in such business practices. The companies tie up with some insurance company and get margins for passing on the business to them. It is also possible many customers may be interested only in the 3rd party insurance whereas by pretending it to be free insurance, the customers are being duped off by compelling them to buy comprehensive insurance in the name of free insurance  and thus could be well categorize as Unfair Trade Practices.

        ( A link of the post is being mailed to Advertising Standard Council of India)