New Delhi: Insurance sector regulator IRDAI on Wednesday permitted general insurers to issue sophisticated add-ons for the motor insurance policy. These are telematics-based motor insurance plans for which the premium depends on the usage of the vehicle or driving behaviour.
"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," IRDAI said in a statement.
In its perpetual endeavour to protect the interest of the policyholders and increase the insurance penetration in India, the IRDAI has been seeking to facilitate the industry to move with the times, it said.
As a step toward facilitating technology-enabled covers, IRDAI has permitted general insurance companies to introduce tech-enabled concepts for the Motor Own Damage (OD) cover including Pay as You Drive and Pay How You Drive.
Pay as You Drive is a comprehensive motor plan where the premium would depend on the usage of the vehicle while Pay How You Drive premium would be linked to driving behaviour.
The regulator has also allowed a floater policy for vehicles belonging to the same individual owner for two-wheelers and private cars.
These covers will be provided as add-ons to the basic policy of Motor Own Damage and the introduction of these will aid in giving the much-needed fillip to Motor OD Insurance in the country and increase its penetration, it said.
Commenting on the circular, Bajaj Allianz General Insurance Chief Technical Officer T A Ramalingam said customers do not necessarily use their vehicles in a similar manner where some customers may have a lesser frequency of vehicle usage or prefer to use public transport or organizational transportation facilities.
The circular on motor insurance add-ons which is principally a usage-based cover as an add-on to an OD policy gives customers additional protection for those customers who have a lesser frequency of vehicle usage or also based on the driving pattern of the insured, he said.
This means, for example, that if you wish to undertake a cover based on the number of kilometres you drive your vehicle, then you can opt for this cover, he said.
The objective with such covers is that motor insurance essentially becomes more affordable, especially for those customers who primarily opt for only TP covers and overlook the benefits of OD covers, he added.
Kapil Mehta, co-founder, SecureNow said these add-ons were not previously allowed because they did not fall in the structure of fixed one-year term, or linked to a single-vehicle format.
This is a very positive change and such products are increasingly being taken up in other markets, like South Africa and can reduce motor insurance costs for persons that drive carefully and less, Mehta said.
Liberty General Insurance president Udayan Joshi 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.
At Liberty General Insurance, the company tested the product concept of Pay as you drive' under the regulatory sandbox, and feel excited about the opportunity, he said, adding, the introduction of add-on covers such as these will also act as a catalyst in deepening the penetration of insurance in the country.
(With PTI inputs)
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