Pay As You Drive: IRDAI allows Tech-Enabled Concepts For Own Damage In Motor Insurance

In its endeavour to protect the interest of the policyholders as well as increase the insurance penetration in India, the Insurance Regulatory and Development Authority of India (IRDAI) has time and again encouraged insurers to bring in innovative features in their offerings to the consumers.

Now, as a step towards facilitating technology-enabled covers, IRDAI has permitted general insurance companies to introduce tech-enabled concepts for own damage (OD) cover in motor insurance policies.

These include, Pay as You Drive, and floater policy for vehicles belonging to the same individual owner for two wheelers and private cars. 

According to the IRDAI, these covers can be provided as add-ons to the basic policy of OD covers. The introduction of the options, it is believed, will give that much-needed fillip to motor vehicle insurance in India and increase its penetration. 

“The concept of motor insurance is constantly evolving. The advent of technology has created a relentless pace for the insurance fraternity to rise up to interesting yet challenging demands of the millennials. The general insurance sector needs to keep pace with and adapt to the changing needs of the policyholders,” the IRDAI said in its release.

In the aftermath of the covid-19 pandemic, many do not drive as frequently as before, but still have to pay the same established annual premium based on the make or model of their vehicle. 

“With the new IRDAI guidelines, customers will have better control over the upfront insurance cost, as the premium will be based on the kilometres driven by the vehicle. It is a win-win for customers who have more than one car, or do not drive as much. For instance, if person A drives his car 200-300 km per month, and person B drives his car 1,200-1,500 km per month, they do not have to pay the same premium under the ‘pay-as-you-drive’ model. It is also good for the insurers to identify their liabilities. A person who drives their car more frequently is more exposed to the risk of accidents and has a higher chance of insurance claim than the one who drives less,” says Ashwini Dubey, head – motor insurance renewals, Policybazaar.com. 

According to Rakesh Jain, CEO of Reliance General Insurance, every individual has different driving and vehicle usage patterns, and with the new add-ons permit, own damage policy coverage can now be tailored based on a customer’s driving behaviour patterns, general upkeep, mileage, and vehicle usage patterns to offer the best features they need.

“The premium will be determined as per an individual’s tailored coverage. Therefore, opting for Pay as You Drive or Pay How You Drive add-on in addition to the traditional policy will benefit those customers who have low vehicle usage, take care of their vehicles, follow traffic rules, and maintain good driving behaviour. 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. Additionally, the new move will encourage people to take care of their vehicles, follow traffic rules, and maintain good driving behaviour,” says Jain. 

“With the new add-ons permit in motor own-damage policies, IRDAI has created a win-win situation. Being a futuristic GI company, we at Reliance General Insurance introduced similar concepts of usage and behaviour-based motor insurance offerings through sandbox products last year. Such models are cost-effective, futuristic, and endorse good driving behaviour. Regarding the motor floater policy, the coverage will enable consumers to have a single policy for their multiple vehicles. This would ensure seamless renewal and single window communication with the insurers,” Jain adds.