The Insurance Regulatory and Development Authority of India (IRDAI) has allowed general insurance companies to issue smart add-ons for motor insurance policies. The premiums for such policies will depend on the use of the vehicle or the driving behavior of the vehicle policy holder.
IRDAI in its statement said: “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 P&C insurance industry must keep pace and adapt to the changing needs of policyholders. In its perpetual effort to protect the interests of policyholders and increase insurance penetration in India, the Insurance Regulatory and Development Authority of India (IRDAI) has sought to help the industry move with the times.
And as a step towards facilitating technology-enabled covers, IRDAI has authorized general insurance companies to introduce the following technology concepts for engine damage (OD) cover – “Pay as You Drive”, Pay How You Drive and a ‘Floater Policy’ for vehicles owned by the same individual owner for two-wheelers and passenger cars.
Nikunj Sanghi, CEO of JS Fourwheel Motors, told Express Mobility, “With these add-ons, the policy sector will match practices around the world. Previously, the bonus for both, the vehicles that drive more and those that drive less, was the same. However, the “pay as you drive” add-on will allow customers to pay a premium based on their usage. Vehicles spending more time on the road are subject to increased risk. And so, vehicles with high usage will require a higher premium while those that are driven less will require a lower premium.
He added that the addition of “Pay How You Drive” will depend on driving behavior. For example, a risky driver, one with more challans and accident records will pay a higher premium while a more careful driver, who has cleaner driving records will pay a lower premium.
On the other hand, the “floating policy” will benefit customers who own multiple vehicles. Under current law, a separate policy for each vehicle is mandatory. However, the floating policy will allow vehicle owners to obtain a single policy for their multiple vehicles.
“The premium will be slightly higher than a regular policy, however, it will be much cheaper than buying multiple policies,” Sanghi concluded.
Ashim Sharma, Partner and Group Head, NRI Consulting & Solutions, in conversation with Express Mobility said: “The policies will incentivize safe driving on the roads as driving behavior will have a direct impact on the premium . Owners will also benefit if the use of their vehicle is less than that of other vehicles, say sales people”.
The floating policy, on the other hand, will easily go into the pockets of multiple vehicle owners and also improve coverage, Sharma said.
Udayan Joshi, President of Liberty General Insurance, said: “This is a welcome move from the regulator, especially at a time when the pandemic has changed the way we work and travel, these additional covers will certainly appeal to customers. who work from home more often, making car insurance more cost-effective for them. Plus, it will give low-mileage drivers more transparency and control over their car insurance. At Liberty General Insurance, we tested the “Pay as you drive” product concept as part of the regulatory sandbox, and we are excited about the opportunity. Furthermore, the introduction of complementary covers such as these will also act as a catalyst to deepen insurance penetration in the country. »