Game Changer Of Motor Insurance

On July 6th 2022 Insurance Regulatory and Development Authority of India (IRDAI) has permitted general insurance companies to introduce the following tech-enabled concepts for the motor own damage (OD) cover:

1) ‘Pay as you drive’

2) ‘Pay how you drive’

3) ‘Floater policy’ for multiple vehicles belonging to the same individual owner for two-wheelers and private cars,"

 This is going to be a game changer by the introduction of the new concept. The Premiums are going to be based on the kilometers been driven, way you drive the vehicle and having a common insured value for all the vehicles will encourage people to take care of their vehicles and driving behavior as well as make them follow the traffic rules.

All these products are available as an add-on to the Motor Comprehensive or Own Damage insurance policy.

Pay as you drive will allow customers to pay a premium based on their usage. Vehicles spending more time on the road may attract a higher premium compared to the ones used less.

Pay how you drive will depend on the driving behavior of the owner. Vehicles with more fines and accidents will have to pay a higher premium.

Floater policy “the most beneficial and need of the hour”, will allow the vehicle owners to get a single policy for multiple vehicles including two-wheelers. This type of insurance covers all private vehicles (cars/two-wheelers) registered under a single owner. It can be a replacement for your separate two-wheeler and car insurance. It is a sum insured based coverage plan, where up to five vehicles can be covered under a single policy.

How to calculate the Sum Insured of Floater Policy?

The vehicle with the highest value IDV will be the primary vehicle of the floater policy. Similarly, the highest IDV will be the sum insured amount of the policy. The rest of the vehicles covered will be treated as secondary vehicles under the policy. 

What is the coverage of the policy ?

The coverage will be Comprehensive Own Damage Cover which will provide for own damages as well as for a loss of the third party.

How about No Claim Bonus?

If you do not make any claim on any vehicle during the tenure of the policy. No Claim bonus will be applied to the premium amount during the next renewal. It is also applicable even if you change your car or bike insurance provider. Benefits can be extended to those vehicles which are covered for a short period as well. 

This will do away with “standard premium for all” practice, and enable customers to avail a premium as per their usage, consumption, and other requirements. AI and data analytics will play a major role in this and help insurers track trends augmenting product innovation.