The insurance market is undergoing rapid developments, which is why, the Insurance Regulatory and Development Authority of India (IRDAI) has granted permission to general insurers to introduce sophisticated add-ons such as Pay As You Drive, Pay How You Drive and Floater Policy. They are to be issued to the same individual owner for two-wheelers and private cars as add-ons in a motor insurance policy.
Usage-based premiums make it convenient
The newly introduced add-ons are being offered with the base Motor Own Damage (OD) policy as optional riders. They can be selected by the policyholder based on the coverage they seek. Thus, customers get a chance to manage insurance policies of multiple vehicles owned by them, with affordable premiums. These are telematics-based auto insurance plans, where the premium is determined the vehicles’ usage and how they are being driven. The IRDAI has been working to help the industry adapt to the times in its ongoing effort to safeguard policyholder interests and boost insurance penetration in India. Motor insurance is constantly evolving, and with the advent of technology, there is much pressure on the insurance fraternity to rise up to the challenging demands.
How does it work?
Pay As Your Drive
This add-on lets customers pay a premium based on vehicle usage. Vehicles that spend more time on the road could attract a higher premium as compared to the ones used less. It will be beneficial for car owners that commute by public transport to work and only use their personal vehicles during weekends. It is simple – the less you drive, the less you pay!
Pay How You Drive
This policy depends entirely on the driving behaviour. Vehicles that attract hefty fines or are involved in more accidents have to pay a higher premium. The data is accessed via the telematics system in the vehicle, and the owner is billed accordingly. If a buyer drives their vehicle in a rash, erratic, or aggressive manner, they would have to pay a higher premium since the risk associated would be greater.
It allows vehicle owners to get a single blanket policy that covers several vehicles, which includes two-wheelers, rather than buying separate policies. So for those who have a car and two-wheeler at home, it is clearly a win-win!
Auto insurance companies are pleased about the development
Auto insurance companies have welcomed this move by IRDAI as it will eventually do away with the “standard premium for all” practice. Thanks to the new add-ons permit, the OD policy can be tailored as per a customer’s driving behaviour, general upkeep, mileage, and vehicle usage patterns, to offer the best features as per requirements.
The introduction of “Pay as you Drive” and “Pay How You Drive” covers, will nudge customers towards a utility-based “Pay as you Use” model, lending greater flexibility and convenience in customer choice. As of now, there is price equity due to lack of user behaviour based pricing of insurance premiums, which is all set to change. It becomes cost-effective for low usage customers, especially those who drive less than 10,000 kilometres. Some auto insurance companies in India are even offering a discount on premiums for vehicles already installed with telematics and anti-theft devices.
How does Anstel’s Autonautics platform benefit auto insurance companies, along with fleet owners and individual car owners, in accordance to the change in policy?
Auto insurance companies
Anstel’s Autonautics platform can help auto insurance companies offer customized premiums to customers based on their driving behavior. It offers a clear insight into driving patterns such as speed, braking, sharp turns, etc. and tendency to get into accidents. Using this data, insurers can reward responsible drivers by lowering premiums and giving additional benefits. The platform lets insurance companies analyze the risk profile of a driver, while tailoring both offline and online car insurance policies with an appropriate pricing model specific to the customer. Insurers can even use the real-time data analysis to investigate claims.
Fleets and personal vehicle owners
As mentioned, the Autonautics platform helps to monitor driver behavior, which prompts safe driving practices on the road, such as sticking to speed limits, not making sharp turns, refraining from driving erratically, and so on. Good driving behavior mean less fuel consumption, with reduced wear and tear of vehicle parts that minimizes repair costs. The platform reduces the cost of business with inspection based on data rather than physical inspection. If you adhere to safe driving habits on the road, you are likely to pay a lower premium, while getting value-added services at the same time.
As we adjust to living with Covid-19, lifestyles have been drastically impacted. Many people don’t drive regularly, but still have to pay the same annual premium based on the make and model of their vehicle. With the right kind of data, the insurance company can offer new, improved, and beneficial need-based insurance policies to specific car owners. Successful implementation of these policies means growth in profits for the insurer and extensive insurance and satisfaction for the policyholder. It is a win-win for both parties!