- Date : 28/11/2019
- Read: 3 mins
The lesser you drive and the safer your driving habits are, the lower your insurance premiums will be. Here's how.
The Insurance Regulatory and Development Authority of India (IRDAI), earlier on Monday, issued a draft proposing changes in the structure of motor insurance coverage for damage caused by self/ driver.
Some key recommendations include simplifying the methodology of calculating sum insured and depreciation on the existing motor insurance plans, renaming General Regulations (GR) on insurance as Motor General Regulations (MGRs), standardisation of ‘no-claim bonus’ slabs for long term policies and including ‘return to invoice’ as a part of basic cover for both new and old vehicles.
However, it is the recommendation of the innovative 'Telematics for Motor Insurance' that could redefine motor insurance in India. With assessment via Telematics, your driving habits will have a direct impact on the motor insurance premium.
How does Telematics work?
A Global Positioning System (GPS) enabled device is to be fitted in the car. The device will capture real-time data with regards to your driving frequency and road etiquettes. This data will be used to assess the driver's risk profile and help insurance companies design a customised motor insurance policy with its own unique insurance value and premium.
Related: 5 Commonly Asked Questions about Motor and Car Insurance
What is the IRDAI proposal?
The IRDAI has suggested creating a common pool of data which can be managed by the Insurance Information Bureau of India (IIBI) to store, analyse and protect customer information. The adoption of Telematics will enable insurance providers to offer discounts based on vehicle usage, distance covered within the policy period and the driving habits while keeping insurance providers up to speed with changing laws, thereby benefitting all stakeholders and shifting the motor insurance industry from a straight-jacketed to a custom risk-based pricing model.
How does this benefit the customer?
Presently, motor insurance premiums are determined by the make and model of the car, engine capacity, geographical zone and Insured Declared Value (IDV) of the car.
With the application of Telematics, the lesser you drive and the safer your driving habits, the lower your insurance premiums will be. With the tracking device, it will also make it easier to offer roadside assistance and emergency services in case of breakdowns/ accidents and could also possibly help save lives by providing prompt medical assistance.
Related: 6 Motor Insurance terms you must know before you claim
What are the challenges?
The Telematics device is expected to cost between Rs 2000 to Rs 3000 and passing on the cost of the device to the consumer may not be feasible considering the average size of motor premiums in India is approximately Rs 10,000. The cost-sensitive Indian consumers may not be up to paying 20% to 30% of the premium value on the device which has a lifespan of roughly two years. However there is a possibility, the benefit of customised lower premiums could more than offset the cost of the device.
The recommendations by IRDAI are open for stakeholder suggestions till December 16, 2019.
To understand the implications of these developments better, take a look at the new IRDAI regulations for motor insurance.
The Insurance Regulatory and Development Authority of India (IRDAI), earlier on Monday, issued a draft proposing changes in the structure of motor insurance coverage for damage caused by self/ driver.
Some key recommendations include simplifying the methodology of calculating sum insured and depreciation on the existing motor insurance plans, renaming General Regulations (GR) on insurance as Motor General Regulations (MGRs), standardisation of ‘no-claim bonus’ slabs for long term policies and including ‘return to invoice’ as a part of basic cover for both new and old vehicles.
However, it is the recommendation of the innovative 'Telematics for Motor Insurance' that could redefine motor insurance in India. With assessment via Telematics, your driving habits will have a direct impact on the motor insurance premium.
How does Telematics work?
A Global Positioning System (GPS) enabled device is to be fitted in the car. The device will capture real-time data with regards to your driving frequency and road etiquettes. This data will be used to assess the driver's risk profile and help insurance companies design a customised motor insurance policy with its own unique insurance value and premium.
Related: 5 Commonly Asked Questions about Motor and Car Insurance
What is the IRDAI proposal?
The IRDAI has suggested creating a common pool of data which can be managed by the Insurance Information Bureau of India (IIBI) to store, analyse and protect customer information. The adoption of Telematics will enable insurance providers to offer discounts based on vehicle usage, distance covered within the policy period and the driving habits while keeping insurance providers up to speed with changing laws, thereby benefitting all stakeholders and shifting the motor insurance industry from a straight-jacketed to a custom risk-based pricing model.
How does this benefit the customer?
Presently, motor insurance premiums are determined by the make and model of the car, engine capacity, geographical zone and Insured Declared Value (IDV) of the car.
With the application of Telematics, the lesser you drive and the safer your driving habits, the lower your insurance premiums will be. With the tracking device, it will also make it easier to offer roadside assistance and emergency services in case of breakdowns/ accidents and could also possibly help save lives by providing prompt medical assistance.
Related: 6 Motor Insurance terms you must know before you claim
What are the challenges?
The Telematics device is expected to cost between Rs 2000 to Rs 3000 and passing on the cost of the device to the consumer may not be feasible considering the average size of motor premiums in India is approximately Rs 10,000. The cost-sensitive Indian consumers may not be up to paying 20% to 30% of the premium value on the device which has a lifespan of roughly two years. However there is a possibility, the benefit of customised lower premiums could more than offset the cost of the device.
The recommendations by IRDAI are open for stakeholder suggestions till December 16, 2019.
To understand the implications of these developments better, take a look at the new IRDAI regulations for motor insurance.
