Recently, IRDA announced the launch of ‘pay as you drive’ and ‘pay how you drive’ insurance cover which are two new technology enabled concepts based on which the premium is charged.
How will car insurance factor in your driving behavior?
Recently, IRDA announced the launch of ‘pay as you drive’ and ‘pay how you drive’ insurance cover which are two new technology enabled concepts based on which the premium is charged. With these two new concepts, customers will have to pay the premium based on his driving behavior and usage. Read on to know how car insurance will factor in your driving behavior.
What does pay as you drive insurance mean?
With this insurance cover, the customer has to pay the premium based on his or her usage. The customer has to provide the insurance company with an approximate declaration of the planned usage which can be tracked online using technological support. The insurance companies have been asked to clarify the process in the event that the claim exceeds the declared usage.
What does pay how you drive insurance mean?
With this insurance cover, the customer has to pay the premium based on his driving skills in terms of speed and usage which will help the insurance company with dynamic or better pricing in terms of premium. The behavior of the customer will be tracked based on the tool or the device installed.
Role in technology in determining the premium based on driving behavior and usage
Driving behavior and usage of the user will be tracked based on the telematics which is basically a mix of telecommunication and informatics. The device will take into account the driving related data of the user, including storage and transfer of the said information. Telematics devices will make it possible for insurance companies to track user driving habits.
The customer too will be able to monitor his driving habits. The installation of this device will ensure that the customer practices safe driving, thus increasing road safety for the customer as well as others. The introduction of technology devices will make it easy for the customer to follow traffic rules and maintain a good driving behavior.
How will pay as you drive and how you drive impact the customer?
Currently, customers are charged a uniform price for car insurance, irrespective of whether they use the car or not. However, with the introduction of the new concepts, it will become cost effective for customers who drive less or less than 10,000 kms per year.
However, with this new introduction, customers who use the car on a daily basis or have a high usage, the premium charged might be slightly on a higher side. However, what is to be seen is how the insurance companies would be able to manage claims in both the cases.
With the introduction of these two new covers, the aim of the IRDA is to increase the insurance penetration in India, thus giving increased transparency and control to the lower mileage car insurance users.