Due to the absence of user behavior-based pricing of insurance premiums, the cost of vehicle insurance is now uniform. The Insurance Regulatory and Development Authority of India (IRDAI) recently permitted general insurance companies to include innovative technology-enabled concepts in its motor insurance plans, including “pay as you drive” and floater cover for multiple vehicles. Let’s understand these new changes.
What are the new guidelines?
You may now purchase a car insurance policy with a premium based on how you drive. This is so that general insurance companies can introduce telematics-based auto insurance covers like “Pay as You Drive” and “Pay How You Drive,” which are allowed by the Insurance Regulatory and Development Authority of India (IRDAI). You pay a premium for these plans based on how much and how well you drive.
Insurers are also permitted to begin a floater insurance for two-wheelers and private vehicles owned by the same person. The opportunity to cover several vehicles under a single insurance, according to experts, will considerably boost the convenience factor by eliminating the need to maintain separate auto policies and keep track of their renewals. The coverage will be an add-on to the basic Own Damage policy, which covers expenses related to vehicle damage.
Is there any policy currently?
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Under the IRDAI’s Sandbox programme, which is a framework put in place by a regulator to allow insurers to perform experiments in a controlled setting under regulatory oversight, insurers are currently selling telematics-based car insurance plans. For instance, Edelweiss General Insurance recently unveiled SWITCH, an on-demand comprehensive motor insurance package (EGI). Since the app detects motion and immediately activates insurance when the vehicle is driven, customers will find it useful. By assessing both quantity and quality of driving and adjusting premiums accordingly, it also rewards customers who drive safely.
How this will affect consumers?
According to experts, customers will gain from and have better control over insurance costs with the new IRDAI standards. Customers that drive less frequently will get profit from it. Using the “pay-as-you-drive” strategy, for instance, person X who drives his car 500–600 km per month and person Y who drives his car 1500–1800 km per month are not required to pay the same premium. It is advantageous for the insurers to be aware of their duties because someone who drives their car more frequently is more exposed to the risk of accidents and has a higher likelihood of making an insurance claim than someone who drives less frequently.
On the other hand, since they would no longer receive cross subsidies, the decision may hurt high consumption users. Because insurance premiums are not currently priced based on user behaviour, there is price equity. However, this will change. Users with moderate consumption, especially those who log fewer than 10,000 kilometres yearly, will pay less as a result. On the other side, doing so would stop high usage customers from receiving cross subsidy, which would result in a little increase in rates for this set. The intricacy of claims will become apparent after insurers give product information. Overall, it looks that these coverings support usage-based pricing and safe driving, which is fantastic for the customer.