To keep pace with new developments in the insurance market, especially involving the use of technology, the Insurance Regulatory and Development Authority of India (Irdai) has permitted general insurers to introduce the Pay As You Drive, Pay How You Drive and floater policy for vehicles belonging to the same individual owner for two-wheelers and private cars as add-ons in a motor insurance policy. These tech-enabled concepts for the Motor Own Damage (OD) cover can be sold on an annual basis.
The regulator, Irdai said, “Introduction of the above options will aid in giving the much-needed fillip to Motor Own Damage cover in the country and increase its penetration.”
Earlier, the regulator approved these product proposals of insurers under a regulatory sandbox guideline. The regulator’s objective behind promoting such products under the regulatory sandbox route was to recognise innovative ideas to foster growth in the insurance sector and simultaneously provide flexibility in dealing with regulatory necessities and ensure policyholder protection. These covers are commonly known as need-based insurance.
Naval Goel, Founder and CEO of PolicyX.com said, “This is now an official product. So it does not have the limitations applied to sandbox products. Sandbox was an innovation opportunity provided to insurers to launch products without approval but to a limited audience.”
Goel further said, “These three newly introduced add-ons will be offered with the base Motor Own Damage (OD) policy as optional riders and can be chosen by the policyholder based on the coverage they look for. Through these, customers will be able to better manage the insurance policies of their multiple vehicles and have affordable premiums as they will pay according to their vehicles’ usage and how they drive it. Riders like ‘Pay how you drive’ lead to lower premiums charged if a customer drives mindfully thus promoting good driving patterns.”
In the post-Covid scenario, many customers do not drive regularly and still pay the same annual premium based on the make or model of their vehicle. Ashwini Dubey, Head of Motor Insurance Renewals, Policybazaar.com said that now with the new IRDAI guidelines, customers will benefit and 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,” he said.
Adding to it, T A Ramalingam, Chief Technical Officer, Bajaj Allianz General Insurance said that the insured can also purchase one add-on motor cover on a floater basis for multiple vehicles the insured owns be it either four-wheeler or two-wheeler vehicles. The objective with 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. “Such initiatives are a push in the right direction in increasing the much-needed penetration of motor insurance in India,” said Ramalingam.