How the insurance premium of a new car is calculated

[Sanjay]

How do we calculate the valuation of the car decreases year by year and similary how the insurance premium is calculated in subsequent years?

[Investorboy]

The depreciation,there is standered formula it’s 5% on ex-showroom price of new cars (1st insurance), 15% on 1st renewal and 10% thereafter on each subsequent renewals – provided no claims are made, i.e. it would vary/differ a little if claims are lodged/settled.

[Investorboy]

The difference is mainly because cars are more prone to accidents in big metro cities with heavy/fast traffic, and may be also because of higher overheads of insurance companies in Grade A cities. The difference is, however it is not much as compaired to grade B , negligible.

I am not aware of the calculations/rates based on which premium amount is
decided.

[Tarun]

Thanks Investorboy for explaining the whole procedure and now its very clear to me (who is from non insurance background).

Thanks again!
Tarun

[Sanjay]

Why there is difference in premium on the basis of cities?