Nowadays insurers have been increasingly focussing upon the proposition of need-based selling and devising flexible plans that not only address the varied needs of customers but also go easy on their wallets.
One such plan, which is here to change the entire outlook on motor insurance, is Usage Based Insurance (UBI). Till now, vehicles attracted a flat rate of insurance premium that owners paid up, even if reluctantly. But with the launch of UBI, motor owners can now get back a substantial amount of the premium they have paid, basis the kilometres they have driven.
What is UBI?
UBI policies are an add-on cover on one’s regular motor insurance. With an UBI, customers can get back benefit as per the distance they drive. With changing patterns of work post pandemic, many companies have adopted hybrid work patterns, where employees can opt for a mix of Work from Office and Work from Home. This has drastically reduced average weekly commute for a large number of regular commuters. Hence new flexible, pay-as-you-drive insurance policies couldn’t be timed better. Such plans also ride well with individuals owning and using multiple cars. The equation is simple – the less you use the car, the more benefit you get!
While individual policies may differ when it comes to detail, users can get up to 25% on Own Damage motor insurance premium if one chooses the option of UBI.
Apart from distance based premium determination, there is another variant of UBI, which rewards policyholders on their good driving behaviour, captured through the telematics devices that come fitted in some vehicle models.
Not just one size
The UBI policies are the opposite of one-size-fits-all policies. Personalisation is the key here, and technology makes it possible. The distance driven is calculated basis the odometer reading, basis which benefit is passed on to the customer at the end of policy term. Calculation of benefit at the end of policy term ensures that there is no pressure on the customer to have a prior commitment on his driving distance. Irrespective of the number of kilometres driven, one’s vehicle will stay protected throughout the insurance term.
Technology is the key
With technology being integrated at every step, there has been a sea of change in the way insurance policies are serviced now. Apart from digital issuance of policies and disbursement of claims, digitization acts as a main correspondent while servicing UBI policies. Customers do not need to go through the process of filing tedious usage reports to show the distance they have driven. Instead insurers consider the odometer reading and the benefit is calculated basis the same. And with the introduction of ‘Connected Cars’ fitted with telematics devices, UBI will be the preferred choice of motor vehicle owners in the near future
Along with the regular benefit up to 25% on the Own Damage premium, customers can also enjoy benefit of a loyalty bonus. Among the insurers, HDFC ERGO offers a loyalty bonus of 5% during the renewal of a policy, provided there is no claims history.
Usage-based insurance poses obvious advantages for both insurers and customers and this is exactly the reason it has become one of the most talked-about and increasingly a preferred choice in the motor insurance space. With the rapidly advancement in mobility technology, it is helping the automotive insurance industry expand with a win-win proposition for all the stakeholders.
(By Parthanil Ghosh, President-Retail Business, HDFC ERGO)