Chennai: Tapping the business at source is what every body would like to do and that is precisely what domestic non-life insurers are becoming adept at. In the case of the passenger car insurance business it is the tie-up with vehicle manufacturers and dealers that is driving the business.

The Chenai-based non-life insurer Cholamandalam MS General Insurance Company Limited is the latest to enter this segment. With its tie-up up with Hyundai Motor India Limited, the non-life insurer becomes one of the preferred insurers for Hyundai vehicles. Buyers of Hyundai cars in India can insure their vehicle with Cholamandalam MS at the point of purchase and later avail cashless repair facilities in the case of accidental damage.

Says Shivakumar S, senior vice president, retail insurance, Cholamandalam MS, "The tie-up gives us access to 184 Hyundai Motors dealer points. To start with we would be pitching for a 20-25 per cent share of premium as the car manufacturer has tie ups with other insurers as well."

Even that 20-25 per cent would give the insurer a sizeable premium as Hyundai Motor sold just below 3 lakh vehicles last year. The company is in the process of expanding its production and its dealer network to 250.

During the current fiscal (2006-07) Cholamandalam MS has earned a total motor premium of Rs85 crore. "Out of that the car premium would be around 90 per cent. We should end FY 07 earning Rs100 crore selling motor policies," says Shivakumar.

For Cholamandalam MS this is the second tie up. The company had earlier sewed up a similar agreement with Toyota Kirloskar Motor Private Limited, Bangalore.

Speaking about the Toyota Kirloskar experience he says, "The premium from insuring Toyota vehicles is around 20 per cent of the total car premium. Since renewals have just started, it would be too early to talk of the renewal ratio. Approximately 8,000 Toyota cars have been insured by us till date. Overall, the claims experience has been good for Toyota vehicles and there has been no cause of concern," Shivakumar says.

For insurers selling policies through auto dealerships or through a subsidiary (like Maruti Udyog Limited) has many advantages. While the first advantage is tapping the business at source, other advantages include: getting the renewals more easily; less claims outgo in the case of cars (more so in the case of new cars); better control over claims outgo as the insurers can leverage the insurance tie up while negotiating for lower accident damage service charges.

On its part the vehicle manufacturer is able to create an assured revenue stream in the form of insurance commission and more importantly vehicle servicing business.

The largest and first such tie up was between government-owned National Insurance Company Limited and the country's biggest auto manufacturer Maruti Udyog, which has set up a separate subsidiary, Maruti Insurance. Today Maruti Insurance generates a premium of around Rs800 crore.