Now, pay for your motor insurance premium based on your driving behaviour, as per IRDAI
This is because the IRDAI has permitted general insurance companies to launch telematics-based motor insurance covers such as 'Pay as You Drive' and 'Pay How You Drive'. Here's what experts say.
- Jul 6, 2022,
- Updated Jul 6, 2022 4:49 PM IST
You can now buy a motor insurance policy that charges you a premium based on your driving behaviour. This is because the Insurance Regulatory and Development Authority of India (IRDAI) has permitted general insurance companies to launch telematics-based motor insurance covers such as 'Pay as You Drive' and 'Pay How You Drive'. These policies charge you a premium based on the quantity and quality of your driving.
Insurers are also permitted to launch a floater policy for vehicles belonging to the same individual owner for two-wheelers and private cars. Experts say the ability to cover multiple vehicles under a single policy will greatly aid the convenience factor, by eliminating the need to hold individual vehicle policies and track their renewals. The covers will be offered as add-ons to the regular Own Damage policy, which covers expenses for damages done to the car.
Currently, insurers were launching telematics-based motor insurance policies under IRDAI’s Sandbox initiative, which is a framework set up by a regulator that allows insurers to conduct experiments in a controlled environment under regulatory supervision. For example, Edelweiss General Insurance (EGI) recently launched SWITCH, which is an on-demand comprehensive motor insurance product. the app detects motion and automatically activates insurance when the vehicle is driven, making it convenient for customers. Moreover, it rewards policyholders if they are driving well, as it measures both the quantity and quality of driving and calculates premiums accordingly.
“It is a welcome move by the regulator, especially at a time when the pandemic has changed the way we work and travel, these add-on covers will definitely appeal to the customers who are working from home more often, thus making car insurance cost effective for them. Further, this will give lower mileage drivers more transparency and control over their auto insurance. At Liberty General Insurance, we have tested the product concept of ‘Pay as you drive' under the regulatory sandbox, and feel excited about the opportunity. Further, the introduction of add-on covers such as these will also act as a catalyst in deepening the penetration of insurance in the country,” said Udayan Joshi, President – Underwriting & Reinsurance, Liberty General Insurance.
Experts say that with the new IRDAI guidelines, customers will benefit and will have better control over the insurance costs.
Ashwini Dubey, Head - Motor Insurance Renewals, Policybazaar.com added: “It is a win-win for customers who have more than one car or do not drive as much. For instance, if person A drives his car 200-300 km per month and person B drives his car 1200-1500 km per month, they do not have to pay the same premium under the 'pay-as-you-drive' model. It is also good for the insurers to identify their liabilities, a person who drives their car more frequently is more exposed to the risk of accidents and has a higher chance of insurance claim than the one who drives less."
On the other hand, the move can pinch high usage customers as they will no more be cross subsidised.
"Currently, there is price equity due to lack of user behaviour-based pricing of insurance premium, which will change. This will make it cost-effective for low-usage customers especially ones who drive less than 10,000 kms a year. On the flip side, such a move will eliminate the cross subsidy currently enjoyed by high usage customers, possibly resulting in slightly higher premiums for this set. How it adds to the complexity in claims will emerge once insurers release product details. Overall, these covers seem to encourage good driving and usage-based pricing, which should augur well for the customer,” pointed out Susheel Tejuja, Principal Officer, founder and Managing Director, PolicyBoss.com
You can now buy a motor insurance policy that charges you a premium based on your driving behaviour. This is because the Insurance Regulatory and Development Authority of India (IRDAI) has permitted general insurance companies to launch telematics-based motor insurance covers such as 'Pay as You Drive' and 'Pay How You Drive'. These policies charge you a premium based on the quantity and quality of your driving.
Insurers are also permitted to launch a floater policy for vehicles belonging to the same individual owner for two-wheelers and private cars. Experts say the ability to cover multiple vehicles under a single policy will greatly aid the convenience factor, by eliminating the need to hold individual vehicle policies and track their renewals. The covers will be offered as add-ons to the regular Own Damage policy, which covers expenses for damages done to the car.
Currently, insurers were launching telematics-based motor insurance policies under IRDAI’s Sandbox initiative, which is a framework set up by a regulator that allows insurers to conduct experiments in a controlled environment under regulatory supervision. For example, Edelweiss General Insurance (EGI) recently launched SWITCH, which is an on-demand comprehensive motor insurance product. the app detects motion and automatically activates insurance when the vehicle is driven, making it convenient for customers. Moreover, it rewards policyholders if they are driving well, as it measures both the quantity and quality of driving and calculates premiums accordingly.
“It is a welcome move by the regulator, especially at a time when the pandemic has changed the way we work and travel, these add-on covers will definitely appeal to the customers who are working from home more often, thus making car insurance cost effective for them. Further, this will give lower mileage drivers more transparency and control over their auto insurance. At Liberty General Insurance, we have tested the product concept of ‘Pay as you drive' under the regulatory sandbox, and feel excited about the opportunity. Further, the introduction of add-on covers such as these will also act as a catalyst in deepening the penetration of insurance in the country,” said Udayan Joshi, President – Underwriting & Reinsurance, Liberty General Insurance.
Experts say that with the new IRDAI guidelines, customers will benefit and will have better control over the insurance costs.
Ashwini Dubey, Head - Motor Insurance Renewals, Policybazaar.com added: “It is a win-win for customers who have more than one car or do not drive as much. For instance, if person A drives his car 200-300 km per month and person B drives his car 1200-1500 km per month, they do not have to pay the same premium under the 'pay-as-you-drive' model. It is also good for the insurers to identify their liabilities, a person who drives their car more frequently is more exposed to the risk of accidents and has a higher chance of insurance claim than the one who drives less."
On the other hand, the move can pinch high usage customers as they will no more be cross subsidised.
"Currently, there is price equity due to lack of user behaviour-based pricing of insurance premium, which will change. This will make it cost-effective for low-usage customers especially ones who drive less than 10,000 kms a year. On the flip side, such a move will eliminate the cross subsidy currently enjoyed by high usage customers, possibly resulting in slightly higher premiums for this set. How it adds to the complexity in claims will emerge once insurers release product details. Overall, these covers seem to encourage good driving and usage-based pricing, which should augur well for the customer,” pointed out Susheel Tejuja, Principal Officer, founder and Managing Director, PolicyBoss.com