The nation’s insurance coverage regulator Insurance Regulatory and Development Authority of India (IRDAI) has permitted normal insurance coverage firms to introduce tech-enabled ideas for the Motor Own Damage (OD) cowl as a way to supply prospects usage-based insurance coverage covers as add-ons to the essential insurance policies of Motor OD.
Issuing a round on Wednesday, the regulator mentioned the idea of motor insurance coverage is consistently evolving and as a step in the direction of facilitating expertise enabled covers, it’s permitting the overall insurers to usher in refined add-ons similar to– “Pay as You Drive” and “Pay How You Drive”– to Motor Own Damage coverage. The regulator has additionally allowed the insurers to introduce floater coverage for automobiles belonging to the identical particular person proprietor for two-wheelers and personal vehicles. This round will come into impact instantly.
“Introduction of the above options will aid in giving the much needed fillip to Motor OD Insurance in the country and increase its penetration,” IRDAI mentioned in a launch.
According to normal insurance coverage business insiders, introduction of add-ons covers like “Pay as You Drive” and “Pay How You Drive” will nudge prospects in the direction of a utility based mostly “Pay as you Use” mannequin, lending larger flexibility and comfort in buyer selection. Moreover, the usage-based covers as an add-on to an OD coverage will give further safety for these prospects who’ve a lesser frequency of car utilization.
“This is a very positive development. The add-ons to the basic policies of Motor OD will allow a purely asset-based rating mechanism to a mechanism which encourages better driving behaviour and optimum usage. Policy premiums would certainly reduce for customers who drive better and use cars less,” Sanjay Datta, chief — underwriting, claims and reinsurance, ICICI Lombard General Insurance, instructed FE.
Datta mentioned introduction of the floater coverage for automobiles will permit prospects to place a number of automobiles collectively below a single coverage. “Gathering data for introducing such add-ons would not be a problem for insurers. There will be a lot of partnerships among different stakeholders. Nowadays there are a lot of apps which can be utilised by the insurance companies. So, technologies are there to implement some of these things now,” he identified, including ICICI Lombard will “definitely” be wanting into bringing in such add-ons to the essential insurance policies of Motor OD.
Udayan Joshi, president – Underwriting & Reinsurance, Liberty General Insurance, mentioned it was a welcome transfer by the regulator, particularly at a time when the pandemic has modified the way in which individuals work and journey. And, these add on covers will certainly enchantment to the purchasers who’re working from residence extra usually, thus making automobile insurance coverage value efficient for them. Further, this can give decrease mileage drivers extra transparency and management over their auto insurance coverage. “At Liberty General Insurance, we have tested the product concept of ‘Pay as you drive’ under the regulatory sandbox, and 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,” Joshi mentioned.
According to T.A Ramalingam, chief technical officer, Bajaj Allianz General Insurance, prospects don’t essentially use their automobiles in an identical method the place some prospects could have a lesser frequency of car utilization or want to make use of public transport or organizational transportation services. Hence, that is the place he felt IRDAI’s round on motor insurance coverage add-ons, which is principally a usage-based cowl as an add-on to an OD coverage, provides further safety for these prospects who’ve a lesser frequency of car utilization or additionally based mostly on the driving sample of the insured.
“The IRDAI circular seems very customer centric and positive move by the regulator. While exact product details would emerge later, this should cheer up the customer confidence and sentiment,” mentioned Susheel Tejuja, principal officer, founder & managing director – PolicyBoss.com.
Tejuja mentioned introduction of covers similar to “Pay as you Drive” and “Pay How You Drive” will nudge prospects in the direction of a utility based mostly “Pay as you Use” mannequin, lending larger flexibility and comfort in buyer selection. Currently, there’s worth fairness on account of lack of consumer habits based mostly pricing of insurance coverage premium, which can change. This will make it value efficient for low utilization prospects particularly ones who drive lower than 10,000 kms a 12 months.
On the flip aspect, Tejuja, mentioned such a transfer will get rid of the cross subsidy at present loved by excessive utilization prospects, presumably leading to barely increased premiums for this set. “How it adds to complexity in claims will emerge once insurers release product details. Overall, these covers seem to encourage good driving and usage based pricing, which should augur well for the customers,” he mentioned.
Industry observers mentioned the power to cowl a number of automobiles below a single coverage will tremendously help the comfort issue, by eliminating the necessity to maintain particular person automobile insurance policies and monitor their renewals. And, this also needs to help in growing product penetration for personal automobile and two-wheeler insurance coverage on the entire and impact decrease lapsation and renewal defaults by prospects. However, the lump sum quantity payable for single premium of a number of automobiles could pinch a number of and it stays to be seen how the declare course of is about for this cowl.