Question

Insurance companies willingly take on our risk for a fee. Give an example of a risk that you or someone else has chosen to insure.

How could you use your technology skill and Excel to organize and analyze data and help you decide if a specific insurance is a good value for the example you gave? Think about the cost and consequences of not having insurance versus the cost of the insurance over time.

Answer 1

Solution:

We have chosen Auto Insurance as the common basis for solving this problem. While purchasing an Auto Insurance, we followed this list of steps:

1. Evaluated the state's minimum insurance requirements.
2. Evaluated one's financial situation related to the required insurance and then decided whether a higher coverage is required to protect one's assets.
3. Reviewed the driving record status to see if there were any outstanding tickets or points on the DL.
4. Check the current policy to understand coverage and premium.
5. Get competing quotes from insurance websites and mobile apps.
6. Follow-up with insurance companies to get additional coverage information.
7. Explore if there are available discounts.
8. Evaluate the insurance company's reliability by visiting the state's insurance department website, reviewing consumer surveys, and talking to family and friends.
9. Review the auto policy before finalization.
10. Cancel the old policy.

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Solution:

The easiest way of purchasing a policy is to visit an Insurance aggregator site like ZBR or PLCBZR, where a consumer can get competitive quotes from several insurance providers in a flash.

For example, getting an Auto Insurance quote, the consumer will have to enter details of the vehicle, such as VIN, on the platform. The platform connects with several insurance companies to fetch real-time competitive quotes for the consumer to select.

A basic Auto insurance policy general comprises of the following six fields:

• Bodily Injury Liability
• Medical Payments or Personal Injury Protection (PIP)
• Property Damage Liability
• Collision
• Comprehensive
• Uninsured and Underinsured Motorist Coverage.

The consumer can map the data on an excel and then compare quotes from different providers in the following manner:

The consumer can compare the quotes from different insurers using the above excel template and then choose the one which offers the maximum value.

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Solution:

Pay heavy fines

Motor vehicle regulations penalize heavily if the driver is caught driving without a valid insurance cover. In India, as per recent regulations, a driver may have to pay up to Rs.25,000 for light motor vehicles or Rs.75, 000 for other motor vehicles as a fine for driving without insurance.

Pay for third party or property damages

If a driver unintentionally harms any person or surrounding property during an accident, the driver is liable to pay the damages. This is called third party liability. Auto insurance covers this third party liability and spares the driver from the loss incurred. In the absence of valid insurance, the driver would have to bear the losses incurred. If the person dies, the driver's liability can be very high.

Pay for own damage

While the driver has to pay losses to the third party compulsorily, the driver also has to pay for their repairs and damage. The costs of own auto repairs are borne by comprehensive coverage. However, without insurance, the onus of the repairs is on the driver. With high costs associated with auto repairs, a financial strain is inevitable.

Face legal complications

Besides financial losses, a driver would also get entangled in legal complications if the car is found without a valid insurance cover. The driver would not only be penalized but can even get imprisoned.

Loss of No Claim Bonus

If auto insurance expires and the driver does not renew it, there is a No Claim Bonus (NCB) loss from the existing policy. Auto insurance plans typically put in an NCB discount in the following year's premium for no current year claims. This discount increases annually and saves premium outgo. If the auto insurance lapses, the driver would lose the accumulated NCB and end up paying a higher premium when the policy is renewed.

In summary, while auto insurance can seem expensive, it is mandatory to have one. While one should always maintain safety, an insurance policy comes handy in case of any eventualities. Also, given the high cost of repairs, it is more prudent to have comprehensive coverage than simply a third-party policy.