The motor insurance industry is witnessing a fast progress and innovative technological development in the recent years. With multiple new concepts launched for both the insurer and the drivers, this industry is seeing new dimensions. Though very less is known about the Usage-Based car insurance, this is an innovative concept which can change the future of motor insurance industry. This concept mainly works on the basis of telematics and RF technology to understand the driving nature as well as the driving practices of the drivers and offering them insurance as per the calculation.
In this kind of car insurance, the premium rates are decided on the basis of the driving style and nature of the driver. While this new insurance technology rewards the diligent and safe drivers, it works as a motivation for the rash drivers to work toward improving their driving pattern. In this way, it is not only helpful for the safe drivers to buy car insurance policy at a low rate but also works towards imbibing safe driving practices in the rash drivers.
In the conventional vehicle insurance, there is no accurate data related to the driving pattern of the driver. The previous driving records and other traffic events are the main factors based on which the premium is fixed. However, this advanced technology-oriented concept is completely different from the traditional method as in this method, the live data of the driver is acquired with the help of Telematics, RF technology, and GPS to determine the exact cost of insurance. Since it is based on accurate data, it is more beneficial for the driver as well as the insurer.
UBI or Usage-Based Car insurance is also known as Telematics insurance, is a newly launched car insurance scheme where the data about the driver's driving habit is fetched and based on that the premium rate is decided. This newly evolved technique is more advantageous compared to the traditional one in a sense that it assesses the actions and behaviours of the drivers in real situations and based on their habits offer the premium rate. This scheme allows the drivers to have more control over their premium costs as they get the right to decide how they want their insurance cost to be. If they inculcate safe driving habits they can get low-premium costs as rewards while on rash driving they have to pay higher premiums on their insurance policy.
The working principle of Usage Based Car insurance scheme is largely different from the conventional one. Driving distance, mileage, place, time, and behaviour of the driver are the main factors which are instrumental in deciding its cost. The driving history of the insured vehicle will be directly transmitted to the insurance company with the help of the telematics devices. After monitoring multiple parameters such as the distance that the car has covered, the time of usage, the road taken while driving, hard braking, hard cornering, airbag deployment, rapid acceleration, record braking history, acceleration pattern, and several others, the insurance companies determine the premium cost for every single driver. The insurance companies collect these data from the reading of the odometers and other in-vehicle telecommunication devices which are installed in the cars by default. The concept of this policy summarises to monitor the driving behaviour of the individual and based on that deciding the insurance premiums. The policy is transparent and every driver is charged in a judicious way.
Here is an example to help you understand UBI in a better way:
Suppose two drivers are driving their vehicles on the same road. While one person is driving at a high speed, another driver is driving at a relatively lower speed. Even though the fast-driving person will cover more distance in a duration of 1 hour compared to the person who is driving at a slower speed, the fast driver will have to pay higher premium rate compared to the slower one. The reason being, the slow-driving person has been abiding by the traffic rules and driving in a safer way compared to the rash driver. So, his/her chances of meeting with an accident or a mishap are lesser compared to the faster one.
The Usage-Based car insurance comes in four different types on the basis of the driving details of the drivers. The variations of UBI are as follows:
Pay-As-You-Drive: In this particular UBI variation, the insurance coverage provided to the driver fully depends on the actual distance that is travelled by the vehicle. The data is gathered from the reading of the odometer of the vehicle.
Pay-As-You-Drive: In this type of UBI scheme, the insurance coverage is decided on the basis of the mileage that is collected from the GPS data or the overall time that the car has taken to travel the particular distance. Using a vehicle-independent module transmitting data via RF technology or cell phone the total number of minutes is calculated.
Pay-As-You-Go: This UBI variation offers an insurance coverage after considering a number of data like the time of the day, driving actions, the time taken to cover the distance, and the historic risk factor of the road.
Apart from benefitting the drivers and the insurers, UBI has some significant benefits from societal as well as environmental point of view. This is the reason why this insurance policy has an upper-edge to the conventional motor insurances. Some of the striking benefits of UBI are as follows:
Bajaj Allianz General Insurance Company is a one-of-its-kind company which has launched the usage-based car insurance in India for the first time. It has recently introduced a new insurance policy named as 'Drive Smart' which at the time of the renewal of the policy will fix the insurance price on the basis of the usage details of the car. The tracking device and the service is currently available for free for individuals along with the add-on covers who will buy car insurance policies from Bajaj Allianz.
This telematics-based insurance policy is a welcome reward for the customers who showcase good driving behaviour. This particular policy will not only be helpful in lowering the cost but will be equally beneficial in providing safety and security to the drivers.
Three major aspects will be covered under this advanced insurance policy are:
This unique first-ever vehicle tracking system in India offered by Bajaj Allianz will work through an innovative DriveSmart device. Through this device, the driving summary and driving pattern of the driver will be constantly monitored and stored for future reference. The user needs to install the device in his/her car and it will provide all the live information on a regular basis. This device in this way will assist the driver in driving safely while also saving on the fuel as well as the insurance cost.
Though this telematics-based car insurance policy is at a very nascent stage in India, it is receiving a positive response from the car owners. Though car drivers are sceptical about its usage, it can be expected that with time it will gain more acceptance among the car drivers who are keen about road safety and understand the requirement of decent driving on Indian streets.