Since most companies have adopted work-from-home policy due to the ongoing COVID-19 pandemic, there has been a drastic nationwide reduction in the number of kilometres we drive. From mid-March through June 1st week, the total number of kilometres driven is down by almost 50% countrywide, according to recent media reports.
These are some truly strange times as extraordinary changes have become common in pretty much all aspects of our lives. Employees throughout the country are being encouraged to work from home, most of the shopping is happening online, and many other things the way we used to do earlier are changing too. With evolution taking place everywhere, why should insurance be left out?
On that note, we now finally have usage-based motor insurance policies in India. The new type of car insurance policies, launched by different insurers, allows car owners to insure their vehicles for kilometres they tend to drive instead of the run of the mill full year.
For all those looking for a car insurance policy that’s priced based on how much you actually drive, pay-as-you-use insurance may be the answer. Over the past few weeks, a handful of insurance companies have started offering pay-as-you-drive insurance. For drivers who aren’t constantly on the road, these plans could offer an opportunity to reduce car insurance costs.
Edelweiss General Insurance (EGI) – Edelweiss SWITCH
The Edelweiss General Insurance’s (EGI) – Edelweiss SWITCH is a driver-based motor insurance policy that not only allows vehicle owners to switch their motor insurance ON and OFF based on usage but also covers multiple vehicles under a single policy as it is a floater policy. Unlike a traditional Motor OD policy, the insurance premium for Edelweiss SWITCH will be calculated on the age and experience of the driver.
The policy offers significant cost savings and convenience to customers, as they may pay the premium only on the days they use the vehicle as per the pay-as-you-use model of Edelweiss SWITCH. However, accidental damage claim may be admitted under the policy only when it is switched on while cover against fire and theft is provided 24/7/365 as these incidents can happen even if the vehicle is not being driven. The Pay-as-you-use model is expected to bring in a change in the standard of determining Motor Insurance premium, as usage and driving experience of the vehicle owner would also be taken into account.
Bharti AXA General Insurance – Pay-As-You-Drive
Bharti AXA General Insurance will now offer usage-based motor insurance policies for private car owners under IRDAI’s Sandbox project. The ‘Pay-As-You-Drive’ insurance product will be a combination of both – comprehensive own damage (OD) and third-party (TP) policy wherein the TP premium will be decided as per the IRDAI norms while the comprehensive OD premium will be calculated basis how many kilometres you intend to drive your car in a given time period.
Currently, the insurer has come up with three slabs, that are 2,500 km, 5,000 km and 7,500 km under the ‘Pay-As-You-Drive’ motor insurance policy. However, customers who think they might drive their car beyond 2,500 km or 5,000 km will have the option of moving to a higher slab in the middle of the tenure or even move to a regular motor insurance policy that provides coverage for unlimited kilometres. However, the additional derived premium in both the circumstances will be payable by the customer.
In case the customer exceeds the kilometre up to which the motor insurance policy is bought, the TP insurance cover will still remain active while there would be no coverage provided for OD cover in case of a claim. Only third party claims arising during the policy tenure would be treated as per the existing liability claims practice.
Tata AIG General Insurance – AutoSafe
Tata AIG General Insurance is another prominent insurer that has joined the list of a select few insurers to offer usage-based insurance cover to private car owners which reduces the overall premium of the vehicle. The new policy called ‘AutoSafe’ uses a telematics-based next-gen application and device to track the usage of the car and decide on the premium.
The app helps policyholders save on premium by selecting the kilometres-driven, promotes safe driving and even works as an anti-theft device as it comes with a GPS-based tracking facility. This telematics device is fitted or linked to the car as the insurance policy becomes active and must be kept throughout the policy period.
Under the plan, customers will have an option to choose among 2,500 kilometres, 5,000 kilometres, 7500 kilometres, 10,000 kilometres, 15,000 kilometres and 20,000 kilometres. If they exhaust all the kilometres within the policy period, they can buy additional kilometres by opting for the top-up kilometres option.
Moreover, in order to promote safe driving, the policy offers bonus kilometres for good driving behaviour at the time of the renewal. The device is linked to a mobile app that records all information, tracks the distance travelled and generates reports about vehicle health or driving patterns of the policyholder. So the lesser you drive, the lower premium you have to pay.
Advantage car owner
With the introduction of pay-as-you-use, motor insurance will evolve to become much more responsive to the needs of the customers. The shift makes sense in this uncertain times when unnecessary journeys are discouraged by the government and organizations and employees alike are discovering the benefits of working from home. Someone who doesn’t drive much might save money by switching to pay-as-you-use car insurance.
However, when considering how much you drive, it is important to know that you don’t mistakenly factor in the length of time your commute takes, especially if you spend time sitting in congested traffic. It is not about how long you spend in your car. It is the distance you are driving. The ‘Pay as You Drive Model’ will undoubtedly enhance insurance penetration in the overall sector by bringing more and more vehicles under the insurance umbrella.
Sajja Praveen is Head of Motor Insurance, Policybazaar.com
