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Being a safe driver on the road and adhering to traffic rules are virtues that go un-acknowledged in India. But, there could soon be an incentive for such healthy-driving behaviour in the form of paying a lower insurance premium for the vehicles.
Life and general insurance company, Future Generali, is planning to launch a 'pay-as-you drive' motor insurance product soon. The 'pay-as-you-drive' model, where the vehicle owner pays motor insurance premium based on his driving behaviour and the mileage he clocks on his vehicle, may soon be introduced in India.
Since drivers with a higher mileage or bad-driving behaviour are more prone to risk of claims, the premium paid by them would be much higher than the one paid by better drivers and less frequent users of vehicles. Those who go on a long holiday would also not be required to pay for the whole year but only for the number of days they actually use the vehicle.
"We have conduced the pilot studies in three-four cities and have collated data. We are now devising the pricing model for the product and hope to file it with the Insurance Regulatory and Development Authority (Irda) for approval within a month. We hope to launch it in the market within three months," said KG Krishnamoorthy Rao, managing director and chief executive officer, Future Generali Insurance.
The company has tied-up with technology services firm, Logica, which has developed a product, Logica Crimson, which calculates the premium on a real-time basis using data from a device aboard the vehicle and gives real-time data on vehicle usage.
"A usage-based insurance solution will ensure a lower claims ratio for insurance companies. The high-risk users would also realise that they have to drive carefully to avail settlement in case of a claim. Also, claims arising from vehicle theft would go down as the device would help track vehicles in case of theft," said Rakesh Venugopal Aerath, head of innovation, Logica.
Selling the insurance product would require embedding the tracking device on the vehicle, which would have to be paid for. "Embedding the product and tracking it would carry a cost. It has to be built into the premium amount. We cannot charge the entire cost in the first year premium but will look at phasing it out over three years. We believe that the customer would not mind paying slightly more when they know that it will help settle claims in genuine cases," Rao said.
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