Vehicle Telematics

V Suryanarayanan talks on recent regulatory changes permitting usage-based insurance

1.       How do you think it will be beneficial for vehicle owners in comparison to conventional vehicle insurance?

Low-usage vehicle users such as predominantly home-office-home users will find the PAYD attractive as they will pay insurance premia for actual kilometers driven. However, it has to be borne in mind that the variable premium linked to usage will apply only for the “own damage” section of the total premium as the prescribed motor third party premium would remain the same for all users. PHYD, on the other hand, can be tricky as in India, we insure the vehicle and not the driver viz in the sense that damage to the vehicle is insured irrespective of who drives it as long as it is driven by a valid license holder.

2.  What kind of services will be offered initially?

      Initially, policyholders’ can reasonably expect PAYD, especially in the standalone OD premium cover for the 2nd and 3rd year covers of a new vehicle where the policyholder would have paid the motor third party premium already at the time of purchase of the car.

3.       Do you see a reduction in insurance premiums?

Usage linked premium is fair to both the insurer and the policyholder as the probability of the vehicle at risk is directly linked to the usage. It has to be seen as to how theft of vehicle risks are priced as the risk in this case remains linear, regardless of usage. One can fairly conclude that low usage vehicle users will see a price reduction.

4.       Will the public transport vehicles which have relatively higher monthly run be disadvantaged?

Such users will go for the conventional policies where it would be status quo. It is also reasonable to expect that insurers would experiment with PAYD and PHYD for the personal usage segment – cars, 2Wheelers initially.

5.       Do you think insurance companies will monetize their customers’ data to partially set off insurance premiums? How will data privacy issues be managed in such situations? 

PHYD would need monitoring of driving patterns, routes generally taken, usage hours etc., which could bring in challenges as to data privacy. We will have to wait for the Data Privacy Bill to understand privacy requirements ad accordingly look at the required guardrails.

Published in Telematics Wire

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