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IRDAI approves new motor insurance policies, vehicle usage and driving behaviour to determine premium

The Insurance Regulatory and Development Authority of India (IRDAI) has permitted general insurance firms to issue smart add-ons for motor insurance policies.

vehicles policies announced
IRDAI permits usage-based motor policies.


The Insurance Regulatory and Development Authority of India (IRDAI) has permitted general insurance firms to issue smart add-ons for motor insurance policies. The premiums for the said policies will depend on vehicle usage or the driving behaviour of the vehicle policy holder. 

IRDAI in its statement said, “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. In its perpetual endeavour to protect the interest of the policyholders and increase the insurance penetration in India, Insurance Regulatory and Development Authority of India (IRDAI) has been seeking to facilitate the industry to move with the times.”  

And as a step towards facilitating technology enabled covers, IRDAI has permitted general insurance companies to introduce the following tech-enabled concepts for the Motor Own Damage (OD) cover – ‘Pay as You Drive’, Pay How You Drive, and a ‘Floater Policy’ for vehicles belonging to the same individual owner for two wheelers and private cars.

Nikunj Sanghi, CEO, JS Fourwheel Motors told Express Mobility, “With these add-ons, the policy industry will match the practices that are being followed worldwide. Earlier, the premium for both, the vehicles that are driven more and the ones that are driven less, was the same. However, the ‘pay as you drive’ add-on will allow the customers to pay a premium based on their usage. The vehicles spending more time on the road are prone to increased risks. And thus, high-usage vehicles will require a higher premium while those driven less will require a lower premium.”

He added that the ‘Pay How You Drive’ addition will depend on the driving behaviour. For instance, a risky driver, the one with more challans and accidental records will have to pay a higher premium while a safer driver, who has cleaner driving records will have to pay a lower premium.

On the other hand, the ‘Floater policy’ will benefit the customers who own multiple vehicles. As per the law at present, a separate policy for each vehicle is mandated. However, the floater policy will allow the  vehicle owners to get a single policy for their multiple vehicles.”

“The premium will be slightly higher than a customary policy, however, it’ll be much cheaper than buying multiple policies.”, concluded Sanghi.

Ashim Sharma, Partner and Group Head, NRI Consulting & Solutions in a conversation with Express Mobility said, “The policies will incentivise safe driving on roads as driving behaviour will directly impact the premium. The owners will also benefit if their vehicle usage is lesser than that of other vehicles, let’s say the commercial ones”.

The floater policy, on the other hand, will go easy on the pockets of owners of multiple vehicles and will also improve the coverage, said Sharma.

Udayan Joshi, President, Liberty General Insurance 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. Further, this will give lower mileage drivers more transparency and control over their auto insurance. At Liberty General Insurance, we have tested the product concept of ‘Pay as you drive’ under the regulatory sandbox, & feel excited about the opportunity. Further, the introduction of add on covers such as these will also act as a catalyst in deepening the penetration of Insurance in the Country.”

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