To enable technology-enabled insurance covers, the insurance regulator IRDAI has given a go-ahead to general insurance companies to introduce concepts like ‘pay as you drive’, ‘pay how you drive’, and floater policies for vehicles belonging to the same individual owner of two-wheelers and private cars as add-ons in motor own damage (OD) policies, reported Business Standard.
With these add-ons, the motor OD policy can be tailored, based on customer driving patterns, vehicle usage, and other parameters to offer the best features.
These are expected to provide insurers with better rating parameters, helping them differentiate the good drivers from the not-so-good ones, impacting premiums accordingly.
Earlier there was no mechanism to distinguish between different categories of drivers, but now they can be singled out and customers that truly deserve a higher discount will be rewarded suitably, wrote BS.
This is also expected to make OD covers more affordable, given most people opt for third-party (TP) liability covers as it is mandatory.
The concept of ‘pay as you drive” stems from the fact that policyholders will be charged premiums based on vehicle usage.
Similarly, ‘pay how you drive’ follows the concept of customers paying premiums on the basis of their driving standards.
Further, floater policies for single owners of two-wheelers and private cars are aimed at reducing the inconvenience to vehicle owners, so that they do not have to buy separate policies for all their vehicles.
Irdai’s circular on motor insurance add-ons is principally a usage-based cover as an add-on to an OD policy that gives additional protection to customers based on their driving pattern and to those who have a reduced frequency of vehicle usage, said T A Ramalingam, chief technical officer, Bajaj Allianz General Insurance.
According to the insurance regulator, the concept of motor insurance is constantly evolving. The advent of tech has created a relentless pace for the insurance fraternity to rise up to interesting yet challenging demands of millennials.
The general insurance sector needs to keep pace with and adapt to the changing needs of policyholders. The introduction of such add-on options will aid in giving the much-needed fillip to motor OD insurance in the country and increase its penetration.