Insurers will pay the full payable claim amount if the named driver was at the wheel, and deter the insured from permitting unnamed drivers, especially children from using the vehicle.
A working group of the insurance regulator, IRDAI, has recommended the use of telematics in motor insurance to enable insurers to offer relevant risk mitigation solutions to customers. The panel has also recommended ‘Named Driver Policy’ as an option for private car and two-wheeler policies. This will enable insurers to build a risk-profile based on the details of the drivers driving the vehicle, age, and experience. Insurers will pay the full payable claim amount if the named driver was at the wheel, and deter the insured from permitting unnamed drivers, especially children from using the vehicle. The panel’s recommendations are welcome—the current motor insurance scenario doesn’t make a distinction between a good and a bad driver. So, over the years, those who drive safely have been compensating the ones who do not.
In telematics—‘pay how you drive’—insurance policies will be based on customers’ driving habits data like speed, distance travelled, and usage of the car captured through a GPS-enabled device or a black box fitted in the car. The data will be collected through a smartphone and on-board diagnostic port, which will transmit a broad set of information to the insurance company. Based on the data, the company will determine the risk profile of the customer, calculate the cost of insurance, and adjust the premium. Globally, countries like the US and the UK have introduced telematics; it is picking up in other European countries as well. In India, motor insurance underwriting is dependent on the asset—the vehicle characteristics—and geographical use. Motor insurance underwriting needs to evolve in line with global best practices, and change into a more scientific and rational exercise. Telematics can help it get there.