Good driving habits can help you save money! Here's how Indian Govt plans to reward drivers?

General insurers are now allowed to provide sophisticated add-ons to vehicle insurance plans by the industry regulator IRDAI. These are telematics-based auto insurance plans, and the cost is determined by how the car is used or how the driver behaves. The Insurance Regulatory and Development Authority of India (IRDAI) has been working to help the industry adapt to the times in its ongoing effort to safeguard policyholder interests and boost insurance penetration in India. "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," Irdai said in a statement.

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) surface, including Pay as You Drive and Pay How You Drive.

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Pay as You Drive is a comprehensive motor plan where the premium would depend on the usage of the vehicle, while the Pay How You Drive premium would be linked to driving behaviour.

The regulator has also allowed a floater policy for vehicles belonging to the same individual owner for two-wheelers and private cars.

These covers will be provided as add-ons to the basic policy of Motor Own Damage. The introduction of these will give the much-needed fillip to Motor OD Insurance in the country and increase its penetration, it said.

Commenting on the circular, Bajaj Allianz General Insurance Chief Technical Officer T A Ramalingam said customers do not necessarily use their vehicles in a similar manner where some customers may have a lesser frequency of vehicle usage or prefer to use public transport or organizational transportation facilities.

The circular on motor insurance add-ons which is principally a usage-based cover as an add-on to an OD policy, gives customers additional protection for those customers who have a lesser frequency of vehicle usage or also based on the driving pattern of the insured, he said.

This means, for example, that if you wish to undertake a cover based on the number of kilometers you drive your vehicle, you can opt for this cover, he said.

The objective with such covers is that motor insurance becomes more affordable, especially for those customers who primarily opt for only TP covers and overlook the benefits of OD covers, he added.

Kapil Mehta, the co-founder, SecureNow, said these add-ons were not previously allowed because they did not fall in the structure of a fixed one-year term or linked to a single-vehicle format.

This is a very positive change, and such products are increasingly being taken up in other markets, like South Africa, and can reduce motor insurance costs for persons that drive carefully and less, Mehta said.

Liberty General Insurance president Udayan Joshi said it is a welcome move by the Regulator, especially at a time when the pandemic has changed the way we work and travel; these add-on covers will definitely appeal to the customers who are working from home more often, thus making car insurance cost-effective for them.

At Liberty General Insurance, the company tested the product concept of 'Pay as you drive under the regulatory sandbox, and feel excited about the opportunity, he said, adding that the introduction of add-on covers such as these will also act as a catalyst in deepening the penetration of insurance in the country.

With inputs from PTI