Does Scrapping Your Car Impact Your Insurance Policy?

Vehicles that are old or inefficient are major contributors to carbon dioxide emissions. People travelling in old vehicles are not safe either. According to studies, older vehicles pollute the environment by 10 to 12 per cent more than newer vehicles. Not to mention that older automobiles are more dangerous and more prone to malfunctions and accidents.

The government has implemented a Vehicle Scrappage Policy to reduce traffic pollution and improve passenger safety. When the car's registration expires and it is determined to be unfit, it will be scrapped in an environmentally responsible manner. What does this new adjustment mean for you if you possess auto insurance?

But before we try to look at the effects on motor insurance, let�s get a brief overview of the new Scrappage policy. As the name implies, this programme will identify automobiles that are inappropriate to drive on roadways because they emit carbon emissions and pollute the environment. This approach will not only minimize pollution but will also have numerous other advantages. Plastic, steel, and other metals will all benefit from the recycling of these cars. With this policy, production costs will be decreased as well. This will boost automobile sales in India since you will receive incentives for purchasing a new vehicle when you recycle your old car.

Impact of Car Scrapping on Insurance

Personal cars older than 20 years and commercial cars older than 15 will be de-registered under the new vehicle Scrappage scheme. Then they're tested, and the ones that pass can be re-registered, while the ones that fail must be discarded.

The following could be the ways car scrapping can impact insurance

• Scrapped cars will provide car makers with industrial materials including aluminium, copper, steel, rubber, and plastic. Vehicle manufacturers can minimise the cost of production by using low-cost manufacturing materials.
• Because the Insured Declared Value (IDV), the car's estimated market value, influences the premium, a fall in new car prices may lower insurance costs.
• Although third-party car insurance premiums are regulated, third-party claims are more significant than own-damage claims because older and unfit vehicles are dangerous on the road and are seen as a major factor in higher third-party claims. Third-party claims are expected to go down in numbers as a result of the vehicle Scrappage scheme since unfit cars will be discarded.
• The insurer's Incurred Claim Ratio (ICR) is affected by older and unsuitable vehicles. The Incurred Claim Ratio is defined as the proportion of total claims settled to total premiums received in a given financial year. The ICR is also expected to go down when unfit cars are eventually scrapped.

Few Pointers to Keep In Mind Regarding Scrappage

• Before the scrap is shipped for recycling, the chassis number is removed from the car. The car owner is expected to contact a licensed scrap dealer to have his or her vehicle scrapped. The dealer should be able to ensure that the car is disposed of in a safe and environmentally friendly manner.
• The scrap dealer will examine the vehicle physically before quoting a scrapping price depending on its weight. The scrap merchant will remove the car pieces and sort them into rubber, plastic, iron, and other materials once an arrangement has been struck.
• The pricing of various automotive parts, such as batteries and tyres, can be negotiated by the car owner. This, too, is highly dependent on the state of these components. If the vehicle has a CNG system, it can be handled separately as well.
• Checking whether the car has been scrapped by the scrap dealer is one of the safeguards you should take. It's possible that the scrap dealer doesn't scrap the vehicle, and it ends up changing hands and being utilized for unlawful purposes. Because the vehicle's registration is in the original owner's name, this could cause problems.
• The original RC does not need to be submitted to the scrap dealer. Only the photocopy of the RC should be provided. You can snap images of the scrapped car to use as evidence in future RTO procedures.

Informing Insurer about the Scrapping of Car

You must have your car's Registration Certificate cancelled at the appropriate Regional Transport Office before notifying your insurer about the cancellation of your coverage. You must notify your insurer of the cancellation of your automobile insurance coverage once it has been cancelled. Your policy will be refunded on a pro-rata basis if you receive a refund. You cannot, however, terminate your insurance if you have claimed during the current policy year.

Consequences of Not Cancelling Car Insurance Post Scrapping

If your car is scrapped, you must get your Vehicle Registration Certificate (RC) cancelled with the appropriate RTO. Take a look at why you should cancel your car's RC and notify your insurer that it has been scrapped.

Document misuse: The RC must be terminated promptly once the car has been scrapped. Fraudulent people may be able to exploit the car's documents if it is not cancelled. The documents can be used to identify a car that has been used for criminal purposes or a vehicle that has been stolen.

Theft prevention: If you don't cancel the RC, criminals may use the scrapped car's papers as papers of a stolen vehicle. You can assist in preventing vehicle thefts by de-registering the car's RC.

Do not forget to inform your insurer about the cancellation of the policy once the registration certificate is de-registered at the respective regional transport office

Insurance Refund on a Scrapped Car

As previously stated, once a car is scrapped, its registration certificate has to be terminated at the earliest. Once you receive a deregistration confirmation from the regional transport office go ahead and cancel your insurance coverage. Refunds are always calculated based on the time left on the current policy. If any claim has been initiated in this period then reimbursement will not be processed. The policy must be terminated irrespective of the fact that a claim was filed or not. If the vehicle registration is cancelled, it is critical to deactivating the car insurance coverage.