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New car insurance plan: Premium based on usage, driving behaviour

The Insurance Regulatory and Development Authority of India (IRDAI) on Wednesday allowed general insurers to introduce technology-enabled concepts of “pay as you drive” and “how you drive” for “own loss (OD) cover” “. Granted, vehicle owners can now buy cheaper insurance policies based on their driving behavior, general maintenance of the vehicle, mileage and usage pattern.

In the case of ‘pay if you drive’, since the policy is valid for a certain number of kilometers, the premium will be less than the standard plan for those who rarely use their vehicles. If a customer wants an insurance cover based on his driving kilometers, he can choose this cover.

Anyone who owns more than one car can buy an add-on motor cover on a floater basis.

“The purpose of this type of cover is that motor insurance is basically more affordable, especially for those customers who initially choose only third party cover and ignore the benefits of OD cover. Such initiatives are a step in the right direction to increase the vital penetration of motor insurance in India, “said TA Ramalingam, Chief Technical Officer, Bajaj Allianz General Insurance.

This will give low mileage drivers more transparency and control over their auto insurance. “We have tested the product concept of‘ Pay as You Drive ’under the regulatory sandbox and are excited about the opportunity. Furthermore, the introduction of add-on cover will 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 the way the person drives his car – the premium is lower if he uses the car in a better, more efficient and safer way.

Some insurance companies have already developed products based on new concepts. These products will require telematics, a combination of telecommunications and information used to keep track of driving-related data, including storage and data transfer.

Telematics uses devices that help track driving habits. The installation of the device is included under the policy and can help the customer as well as the insurance company to monitor the driving habits. Using these monitoring tools, it can help improve road safety for customers and other vehicles. Also, using this data, insurance companies can recommend better plans that offer comprehensive coverage depending on usage.

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

Currently, insurance premiums have uniform pricing equity for motor covers in the absence of user-based pricing. The new concepts will make it affordable for low-usage customers, especially those who drive less than 10,000 kilometers a year, as well as those who drive more safely and efficiently.

“On the flip side, such a move would eliminate the cross-subsidies currently enjoyed by high-end customers, perhaps at a slightly higher premium for this group. How this adds to the complexity of the claim will only come out when the insurers disclose the details of the product. Overall, these seem to encourage good driving and user-oriented pricing, which should be good for the customer, ”said Sushil Tejuja, Founder and MD, (Landmark Insurance Brokers).

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IRDAI says the concept of motor insurance is constantly evolving. “The advent of technology has made the insurance fraternity attractive, yet challenging, creating relentless momentum for millennial demand. The general insurance sector needs to keep pace with the changing needs of policyholders and adapt, ”IRDAI said.

According to the General Insurance Council, insurance companies collected a total of Rs 70,432 crore in premiums for the year ended March 2022, an increase of 3.98 per cent.

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