Insurance plan

New auto insurance plan: premium based on usage, driving behavior

WITH the Insurance Regulatory and Development Authority of India (IRDAI) allowing general insurance companies on Wednesday to introduce technological concepts of “pay as you drive” and “pay how you drive” for “own damage cover (OD )”, vehicle owners can now purchase cheaper insurance policies based on driving behavior, general vehicle maintenance, mileage and usage patterns.

In the case of ‘pay as you drive’, the policy being valid for a fixed number of kilometres, the premium will be lower than the standard plans for those who rarely use their vehicle. If a customer wants insurance coverage based on the number of kilometers traveled with his vehicle, he can opt for this coverage.

A person who owns more than one vehicle can also purchase additional engine coverage on a floating basis.

“The goal of these coverages is to make car insurance essentially more affordable, especially for customers who primarily opt for third-party coverages only and overlook the benefits of OD coverages. Such initiatives go in the right direction to increase the much needed motor insurance penetration in India,” said TA Ramalingam, CTO of Bajaj Allianz General Insurance.

This will give low mileage drivers more transparency and control over their car insurance. “We have tested the ‘pay as you drive’ product concept as part of the regulatory sandbox and are excited about the opportunity. Furthermore, the introduction of supplementary covers will also act as a catalyst to deepen insurance penetration in the country,” said Udayan Joshi, President, Underwriting and Reinsurance, Liberty General Insurance.

In the “Pay How You Drive” concept, the insurance premium depends on how the person drives their vehicle – the premium is lower if they use the vehicle more efficiently, more efficiently and more safely.

Some insurance companies have already designed products based on the new concepts. These products will need telematics, a mix of telecommunications and computing that is used to track driving data, including the storage and transfer of information.

Telematics uses devices that help track driving habits. Installation of the device is included in the policy and can help the customer as well as the insurance company to monitor driving habits. With these monitoring tools, it can help improve road safety for the customer and other vehicles. Additionally, using this data, the insurance company can recommend better plans that provide comprehensive coverage, based on usage.

“The new ruling will encourage people to take care of their vehicles, obey traffic rules and practice good driving behavior,” said Rakesh Jain, CEO of Reliance General Insurance.

Currently, there is uniform rate equity for automobile coverage due to the absence of user behavior-based insurance premium pricing. The new concepts will make it cost-effective for low-use customers, especially those who travel less than 10,000 km per year, as well as those who drive more safely and efficiently.

“On the other hand, such a move will eliminate the cross-subsidy currently enjoyed by high-use customers, which could result in slightly higher premiums for this group. How this adds to the complexity of claims will become apparent once insurers will have published product details. Overall, these seem to encourage good driving and usage-based pricing, which should bode well for the customer,” said Susheel Tejuja, Founder and CEO of (Landmark Insurance Brokers).

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According to IRDAI, the concept of car insurance is constantly evolving. “The advent of technology has created a relentless pace for the insurance fraternity to meet the interesting, yet challenging, demands of millennials. The general insurance industry must keep pace and adapt to the changing needs of insured,” IRDAI said.

Insurance companies have mobilized a total premium of Rs 70,432 crore, an increase of 3.98%, in the motor vehicle category in the year ended March 2022, according to data from the General Council of Insurance. insurance.