Why Car Insurance Differs by Region in India

Insurance Zones Determined by the IRDAI

The Insurance Regulatory and Development Authority of India (IRDAI) divides cities into Zone A and Zone B:

Zone A: Comprises metro cities such as Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, and Ahmedabad.

Zone B: All other towns and rural areas.

No. of Claims / Accident / Premium (Revenue)

Zone A: Higher premiums are attracted by these cities due to more traffic congestion, higher accident rates, and more repair prices.

Accident and Claim Frequency

Areas that record a lot of accident claims will tend to be more expensive to insure. For instance:

• Cities are densely populated with vehicles, making them more vulnerable to accidents.

• Rough roads and reckless driving lead to high claims in some areas.

• The insurers charge premiums that are higher in these areas in order to cover possible payout risks.

Rates of Theft and Vandalism

High vehicle theft or vandalism risk areas are considered risky for insurers. For instance, metropolises such as Delhi and sections of Uttar Pradesh tend to have a higher number of vehicles stolen, resulting in higher premiums.

Gated societies or rural villages with fewer theft cases tend to have cheaper premiums.

Natural Calamity Exposure

If your locality is flood-, earthquake-, or landslide-prone—like certain zones in Assam, Uttarakhand, or the city of Mumbai during the monsoons—your car is perceived to be more at risk of natural damage by insurers.

Regional factors have a considerable influence on comprehensive insurance premiums.

Cost of Repairs and Spare Parts

Areas where labor and spare parts cost more (such as large metros) drive up the mean claim size. This means a higher premium for vehicle owners in such areas.

Tier-2 or tier-3 cities, on the other hand, could have lower repair prices, hence cheaper premiums.

Traffic Congestion and Road Quality

Heavy traffic areas = more bumper-to-bumper driving = more opportunities for small accidents.

Regions that have bad road conditions or under-developed roads can experience more accidents, impacting the regional premium once more.

Therefore, the same vehicle in a smaller city will cost less to insure than the same vehicle in a traffic-congested metro.

Registration Location (RTO Zone)

Vehicle insurance is linked to the Regional Transport Office (RTO) where your vehicle is registered. Registration identifies the risk factor of the region and determines the base premium.

Even if you travel primarily in a different city, the premium will vary based on the registered RTO area.

Fuel Type and Regional Usage Habits

Areas where diesel vehicles are prevalent might have a little variation in terms of pricing because of higher engine capacities. Additionally, regions where cars are utilized for long journeys or commercial usage might have varying risk evaluations.

FAQs

Why is car insurance more expensive in metro cities?

Due to higher accidents, thefts, and repair expenses in metros, raising the risk for the insurer.

May my premium be altered if I relocate to another city?

Yes, insurers can adjust your premium according to the risk profile of your new city.

Is the city of registration or driving city used to calculate premium?

The premium is determined by the city where the car is registered, and not where it's driven most often.