Pay premium ‘as you drive, how you drive’

MUMBAI: Insurance companies will soon offer vehicle owners analytics-based insurance that include ‘pay as you drive’ policies and covers where the premium varies according to driving behaviour. Companies have also been allowed to issue floater policies for multiple vehicles belonging to the same owner.

“As a step towards facilitating technology-enabled covers, Irdai has permitted general insurance companies to introduce tech-enabled concepts for the motor own damage (OD) cover,” the Insurance Regulatory and Development Authority of India (Irdai) said in a statement. According to the regulator, the advent of technology has created a relentless pace for the insurance fraternity to rise up to interesting yet challenging demands of millennials.

Digit Insurance MD & CEO Jasleen Kohli said, “This will encourage insurers to come out with new tech-enabled motor products and increase competition. We wholeheartedly welcome it. With impending open architecture for all distribution channels and changes to ‘file and use’ products, the competition will ensure better value for customers.”


Besides allowing companies to float ‘pay as you drive’ and ‘pay how you drive’ policies, Irdai has allowed insurers to issue a floater policy for vehicles belonging to the same individual owner for two-wheeler and private cars. A ‘pay as you drive’ cover is one where the premium is linked to the usage of the vehicle and will benefit cities like Mumbai where many car owners commute by public transport and use their vehicles only on the weekends. ‘Pay how you drive’ policies collect the driving behaviour of the insured and bill them accordingly.

Before the pandemic, the insurance regulator had proposed to allow companies to use telematics for motor insurance. According to the draft proposal, a central repository of telematics data can be created where data from various sources will flow to a common pool. The data would be gathered using the vehicles’ GPS. According to Bajaj Allianz chief technical officer T A Ramalingam, Irdai’s circular on motor insurance add-ons is principally a usage-based cover as an add-on to an OD policy that gives customers additional protection for those who have a lesser frequency of vehicle usage or also based on the driving pattern of the insured.

“This means for example that if you wish to undertake a cover based on the number of kilometres you drive your vehicle, then you can opt for this cover. With this circular, the insured can also purchase one add-on motor cover on a floater basis for multiple vehicles the insured owns, be it either four-wheelers or two-wheelers,” Ramalingam said. He added that the objective of such covers is that motor insurance essentially becomes more affordable, especially for those customers who primarily opt for only third-party covers and overlook the benefits of OD covers.