2022: A year of innovation for motor insurance

By Ashwini Dubey

The year 2022 will be remembered as the one when the world got back to normalcy after a long battle with Covid-19. Even as we continue to make a strong comeback, there’s no denying that mobility has been changed forever. To match pace with this transition, motor insurance too has undergone a massive change this year.

The regulatory authority’s progressive outlook has enabled this transformation where motor insurance no longer follows a one-size-fits-all approach, but has become more customizable. The IRDAI is evidently embracing technological advancement, and introduced many worthwhile proposals and customer-friendly policies that facilitate digitization. The launch of the usage-based motor insurance add-ons or pay-as-you-drive (PAYD) policy is a landmark step for the consumer.

Let us round up how motor insurance became more customer-centric in 2022 and what 2023 holds for the future.

Customer-centric policies

Conceptualized and designed to suit driving habits in restricted mobility, the PAYD policy caters to car owners with limited vehicle usage. Insurers have come up with variants of PAYD, each tailored to varied consumer preferences. On one hand there’s an option to switch off the insurance for days you don’t drive, and on the other hand there are plans offering different driving ranges to choose from. Similarly, there are plans meant for customers driving less than 15,000 km annually and rationing the premium accordingly.

Also read: Tamil Nadu’s EV policy ends, electric vehicles to cost 15% more

To explain, it entitles policyholders to customize their insurance plan by setting a mileage limit based on a predefined usage slab. Once specified, the premium is charged on the basis of the kilometers driven rather than a standard premium. The lower the limit, the higher is the discount. For example, if you carpool five days a week, you can limit the usage accordingly and not pay for unused miles. Some insurance companies also offer discounts of up to 25%, subject to the annual mileage opted for and the odometer reading.

Technology at its best

It was a year when technology was used to cater to personalized consumer needs. In new-age policies, the premium is not only decided on the basis of how much you drive, but also depends on how well you driveā€”insurance firms use technological tools and telematics devices (a tracking device or a mobile app) to track usage and driving habits . They analyze your risk based on how responsibly you drive (after examining backend algorithms). For example, if you don’t violate traffic rules (like jumping traffic lights or over-speeding), this indicates you are less prone to accidents, and therefore eligible for lower premium. Based on the plan you opt, you can get incentivized for good driving habits, which is a first for the motor insurance industry.

A year of innovation

Quite innovative in its approach, the policy allows you to switch your own damage cover on or off based on your needs. In this case, the third-party coverage will continue throughout the policy period. But if the policy is inactive or off, no coverage will be offered for accidental damage to the car. Likewise, if you are worried about exceeding the defined kilometers, it still provides for third-party cover, while the insurer may reject the own-damage claim or ask you to pay some amount. Often, the insurer offers the option to add more kilometers. Also, if you have multiple cars, there are family floater plans available that cater best to your needs.

Also read: Consumer sustainable cos to drive double-digit growth in 2023, backed by demand for premium & feature-led products

To recapitulate, 2022 was truly a year of innovation for the motor insurance industry and, undoubtedly, has set the right tone for the year to come. Hopefully, the industry will see more such progressive and customer-oriented policies in 2023.

The author is head, Motor Insurance Renewals, Policybazaar.com

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