The insurance regulator has also proposed floater covers for vehicles. Just like floater health policies cover all members of a family, vehicle owners can get several vehicles covered under a single policy. In health insurance, floater policies are very popular, but whether they will become the preferred option in motor insurance is debatable. Vehicles owned by a family are usually registered in different names, which could be a hurdle in such floater covers.
Irdai has also allowed insurance companies to offer discounts based on the quality of driving. A telematics device is fitted in the car to monitor the condition of the vehicle and driving habits of the user. This data is then interpreted to give discounts to careful drivers. It can also penalize rash and negligent drivers. These developments appear to be good news for those who own multiple vehicles or have not been driving too much due to Covid restrictions. They won’t have to shell out the full premium if their vehicles are not being used too much. “The introduction of these options will help in giving the much needed fillip to motor own damage cover in the country and increase its penetration,” Irdai said in a statement.
Expectedly, the insurance industry has praised the move. “This is a transformational development in the motor insurance category. It will increase utility-based insurance purchases and also encourage safe driving habits,” says Sanjay Datta, Chief Underwriting and Claims, . “Irdai has created a win-win situation. Own damage coverage can now be tailored based on a customer’s driving behaviour. It will benefit customers who have low vehicle usage, take care of their vehicles and follow traffic rules,” says Rakesh Jain, CEO of General Insurance.
However, a closer examination shows that such policies can offer only limited benefits. The discounts offered on the premium are not too exciting (see table). If you choose the 7,500 km slab, you get only a small 10% off on the regular premium. Mind you, the discount only applies to the own damage premium, and the mandatory third-party premium and other add-on covers are not affected. The discount gets a little more attractive for a lower limit of 2,500 km, but that works out to an average commute of less than 7 km in a day. Consider that before you opt for a policy with a low slab.
The good news is that buyers can switch to a higher slab or even to a regular unlimited policy if they end up driving more than the slab limit. But this upgrade should be done well before the threshold limit is exceeded. It is not possible to upgrade after a mishap or claim incident. “Insurers would have to clarify the process of setting a claim if a customer exceeds the declared usage,” points out Supriya Rathi, Whole Time Director, Anand Rathi Insurance Brokers.
The installation of telematics devices is another ticklish issue because it raises privacy concerns for the car owner. No doubt it will reduce the insurance premium, but this discount comes at a cost. Go for it only if you are comfortable with the thought that the insurer will have 24×7 data on your car’s movement.