• Usage-Based Car Insurance in India

    Car Insurance
    • Protect yourself with third party or comprehensive cover
    • Use bumper to bumper policies to reduce your liability
    • Enjoy facilities like zero depreciation and roadside assistance covers

    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.

    Usage-Based Car Insurance in Detail

    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.

    Working principle of Usage-Based Car Insurance

    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.

    Telematics devices used in Usage-Based motor insurance

    • Smartphones with mobile apps
    • 12V dongles
    • Bluetooth connections
    • Black boxes
    • GPS devices
    • On-board sensors

    Steps of Usage Based Insurance

    • At first, the insurance company collects all the information about the driver from the telematics reading.
    • Next, they evaluate the data and on the basis of that fix an insurance premium charge for that particular driver.

    Example of Usage-based car insurance

    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.

    Various type of Usage-Based Car Insurance

    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 (PAYD)
    • Pay-How-You-Drive (PHYD)
    • Pay-As-You-Go (PAYG)
    • Distance-Based insurance

    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.

    Benefits of Usage-Based Car Insurance

    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:

    • This insurance scheme helps to create awareness among the drivers and make them more cautious about their driving pattern and behaviour. Since the insurance company monitors and assesses their driving habits from live data, the drivers remain more conscious while driving on the roads. As a result, the accidents on the roads get reduced.
    • Through this insurance scheme the drivers gain a hold on their premium rates. It is like they get the authority to decide how much they want to pay. If they drive safely at a lesser speed, they have to pay less premium and if they drive fast in a rough pattern without following road safety measures then they have to pay more as a premium for their car insurance policy.
    • Due to this motor insurance scheme the pedestrians and other vehicle owners can walk and drive on the road without worrying about their safety. The drivers will be extra cautious when they are driving on the road and this will promote road safety.
    • It is a good way to bring rash driving under control. Since drivers won’t want to pay higher insurance costs, they will keep speed under control resulting in less number of accidents and incidents of road rages.
    • The buyers of the UBI policy will be able to save a good deal of money on motor insurance premium and can invest it in something else. Simply by instilling the habit of decent driving, the drivers can get significant reduction on the premium rate.
    • While the asset-based motor insurance policyholders have to pay the full premium for their insurance, the buyers of the usage-based motor insurance policy especially those who drive their vehicles within the city limit will have to pay only for their usage.
    • The usage-based car insurance policy in which the vehicle will be under constant monitoring is helpful in reducing the crime rate in the country. Also, this technology has made it easier to track and find a stolen car which is not possible in case of a traditional car insurance policy.
    • It not only provides benefits to the user, but it is equally helpful for the insurers. This insurance policy enables the insurance companies to evaluate the risk factor associated with the vehicle and then based on that finalise the insurance cost.
    • Apart from reducing the accident rates on roads, this insurance policy will also play a significant role in reducing the congestion as well as vehicle emissions on the roads.

    Why are car owners likely to opt for Usage-based car insurance?

    • Car owners are keen to invest in the telematics-driven usage-based insurance as it offers a low premium for low-risk driving and high premium for high-risk driving. Hence, by improving their driving patterns they can significantly reduce their premium cost.
    • It reduces the number of deaths caused due to road accidents. Since drivers will make a switch to safe-driving, people can travel on road more safely.
    • The data regarding the car mileage and routes that are collected through GPS devices will be helpful in case of accidents. The insurance company will get the data immediately after the accident and this will help them in assessment.
    • The car owners need not rely on the cars coming with inbuilt devices to avail such a car insurance policy. The car drives can make use of their smartphones in order to share the live driving data with the insurer. They just have to pair up their smartphones with the cars and then using the internet connection of the phone they can easily transmit the data.
    • The car owners can get customised premium rates from the insurance policy companies which may be much lower than the price that you are paying at present. As per the calculation of the reliable authorities, this insurance can bring down the car insurance premium by 30%.
    • Since the drivers get constant updates about their driving habits, this helps them to become better drivers when they are on the road.

    Usage-based insurance providers in India

    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:

    • Decent drivers needn't subsidise premium costs for the rash drivers
    • The car, as well as the driver, will be safe against accidents and mishaps due to the safety measures adopted by the drivers
    • Based on the good driving pattern and history the drivers will be able to save a good amount of money

    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.

    *The customer reviews/feedback/opinions expressed on this website are solely of their authors and do not reflect, in any way, the view of BankBazaar Insurance.

    Display of any trademarks, tradenames, logos and other subject matters of intellectual property belong to their respective intellectual property owners. Display of such IP along with the related product information does not imply BankBazaar's partnership with the owner of the Intellectual Property or issuer/manufacturer of such products.