Driving habits could determine your motor insurance premium: IRDAI proposal

The Insurance Regulatory and Development Authority of India (IRDAI), on November 25, 2020, in a draft proposal recommended adopting 'Telematics for Motor Insurance'. What is telematics you ask? Well, telematics is a method of monitoring your vehicle using a Global Positioning System (GPS)-device fitted in your vehicle. This device will monitor and capture data related to your real-time driving habits. So, your driving habits will determine how much motor insurance premium you will have to pay.

Devendra Rane, Founder and CTO, Coverfox.com says the evolution in the motor insurance space has opened doors for deeper development and easier claims settlement. "It helps in customizing the offering as per the customer’s driving behavior, rather than just giving a flat insurance price to every driver for the same type of vehicle. Thus, a person driving the same vehicle in a smooth manner might have to pay a lesser amount as opposed to someone driving rash. Collectively, based on a number of metrics, it could ease out the claims process as well, as an insurer can investigate the claims better on the basis of other data points and impact analysis as well," he said.

What IRDAI has proposed
According to IRDAI's draft proposal, a central repository of telematics data can be created where data from various sources flows to create a common pool. "Insurance Information Bureau of India (IIBI) which acts as a data repository for insurance companies can manage the data and its protection," it stated.

How telematics is used in motor insurance?
As mentioned earlier, telematics is a method used to monitor and capture data related to driving habits. Accordingly, this data can be used to assess your risk profile as well. The data captured by the device helps insurers for designing a customised motor insurance policy with its unique premium.

When this does get implemented, motor insurance premiums can be determined through vehicle usage, total distances covered and your driving habits.

How it will benefit you
Currently, motor insurance policies are being priced based on parameters like the insured declared value (IDV) of the vehicle, make and model of the vehicle, engine capacity and the geographical zone.

However, once telematics for motor insurance will come into effect, you motor insurance premium can be customised. You will not have to a pay huge premium based on the car make and model rather it will be based on your driving habits. The better/lesser you drive, the lesser premium you will have to pay for your motor insurance. The technology will also help in roadside assistance and vehicle tracking.

Sajja Praveen Chowdary, Head- Motor Insurance, Policybazaar.com said that by allowing the usage of telematics, it opens up the possibility for innovation like pay as you drive (possible only when accurate kms can be measured) which does not exist as on date. This way in future you may get an option to customise the coverage in your motor insurance policy based on the kilometers you wish to cover during a tenure and pay premium accordingly. "It also has specified that IIBI will be the holder of Data from such devices for usage at the time of underwriting etc.," he added.


Apart from this, IRDAI also proposed 24 changes to the structure of motor insurance policies.