Anil Kumar, a software engineer from Noida, travels 20 kilometres twice a week to get to Delhi for work. For the remainder of the week, the 28-year-old prefers working from home to save time and money on his sedan’s expensive fuel. In contrast, Chetan Sharma, a 30-year-old sales executive based in Delhi, travels roughly 40 km to Gurugram and back daily and enjoys long road trips on the weekends. Sharma travels more than 20,000 km annually, while Kumar’s vehicle travels only 4,000. Nevertheless, despite these stark differences in usage styles, both pay comparable premiums for car insurance policies.
Policies like “pay as you drive” (PAYD), which base premiums on the car’s mileage, have relieved people like Kumar. When the vehicle is driven less, these add-ons result in lower premium payments.
In July 2022, the Insurance Regulatory and Development Authority of India (IRDAI) approved tech-enabled concepts in motor own-damage (OD) policies, leading to the emergence of usage-based products. Insurance companies are now considering premium rates based on telematics data, which tracks a car’s location and driving habits. Customers can easily purchase this add-on online or through insurers when renewing or buying a motor insurance policy, with a simple form to complete for availing. # *
Travelling A Distance
In pay-as-you-go insurance, the premium depends on the purchased mileage slab. Distance is calculated using the car’s odometer reading, as telematics devices are limited in India. Odometer readings can be tracked with a mobile app or telematics device. You can use a car insurance calculator to estimate the cost of your premiums.
For a car driven for 0–2,500 km, the insurer offers a 25% concession on the premium; for 2,501–5,000 km, 17.50%; 10% for 5,001–7,500 km; and 7,501–10,000 km, 5 %. For travel distances over 10,000 km, there is no concession. The only odometer readings that need to be updated by the policyholder are the initial reading when the policy is purchased and the final reading when the policy expires or is renewed.
Even if the policy isn’t renewed, the policyholder can still receive benefits based on their mileage. Benefits are transferred via NEFT and can be used for premium renewal. If the allotted distance is reached, more can be added. Pay-as-you-go insurance plans are advantageous for those with multiple cars or short commutes. Concessions vary based on vehicle details, and some insurers provide renewal bonuses. Paying the insurance premium based on actual usage is wise for low-mileage car owners. Claims are subject to terms and conditions set forth under the motor insurance policy.
For careful drivers like Kumar, a “pay how you use” (PHYU) variation of PAYD is worth considering. PHYU bases the premium on driving behaviour and tracks various metrics. An internal score is generated through an algorithm that allows precise pricing. The advent of connected cars in India enhances PAYD offerings by providing insurers with high-quality driving data.
Some plans offer extreme customisation, allowing you to turn your policy on and off. For instance, if you’re out of the city and not driving, you can turn off insurance by deactivating the policy. ##
*Standard T&C Apply
#Visit the official website of IRDAI for further details.
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.