The auto finance market in India has matured over time, making it one of the most developed markets in Asian region. The growth in the automotive market is expected to be driven by India’s strong demographic, socio-economic fundamentals as well as well developed industry fundamentals, such as credit infrastructure. Captives have emerged as key contenders in the Indian automotive finance landscape – 75-80 per cent finance penetration of OEMs with captives has been higher than that of the overall market, primarily driven by innovative products and campaigns.
Insurance Head of Volkswagen Finance Pvt. Ltd. (Volkswagen Financial Services), Mr. Abhai Mirakhur provided his insights on the same, where he gave us an overall explanation of the insurance scenario in India and how Volkswagen Financial Services plays an important part, throughout. There is a huge difference when it comes to the Indian and Global scenario, the risk calculating factor, as an example. Traditionally in India, risk is calculated on the basis of demography, size of the car, the engine CC, etc. whereas globally, as the audience is much more mature – factors like the mileage, running of car, driver, age of driver, etc. are taken into consideration.
Coming to the Indian segment, Mr. Mirakhur spoke about Volkswagen Financial Services being a captive by explaining, “It is tough, typically for service providers like us when it comes to competing in the open market.” He further elaborated by saying, “Our pricing is different from the non tie-up insurance companies, as they work in their preferred pockets. These insurance companies are very aggressive when it comes to giving discounts, whereas our main focus remains on product and services and we stand committed across our entire dealer network and customers.”
Mr. Mirakhur talks about misseling by saying, “The traditional lingo commonly being used is ‘Bumper-to-Bumper’. They further commit to customers not to worry, because in ‘Bumper-to-Bumper’ everything is covered. Now, the customer is anticipating that if anything goes wrong with my car, it will be covered. But when it comes to the after-sales, they claim that not a lot of things are covered. So what’s the point of selling ‘Bumper-to-Bumper’?” Such instances of misselling have been observed when it comes to non-preferred insurance companies. Misleading terms like ‘Bumper-to-Bumper’ and ‘ Zero Dep.’ are actively used to lure customers, but often fail to keep up to these big claims. In retrospect, it is just Bumper and Bumper, with nothing in between.
Volkswagen Financial Services, as a captive does not indulge into such misleading claims. It operates with two distinct products – ‘Drive Assured Economy’ – which covers zero depreciation as one of the features and ‘Drive Assured Elite’. In-depth explanation and differentiation between the two is given to the customer beforehand, to avoid any sort of confusion. The products are priced accordingly, yet transparency has always been a constant in the operations.
Mr. Mirakhur concludes by saying, “Volkswagen Financial Services only works ethically and transparently. But unfortunately, sometimes being transparent also makes it tough to sell the product. In this competitive market, where sellers are going every length to give discounts, Volkswagen Financial Services still stands as a reliable and instrumental source of Insurance.”