THE SCHEME

With premiums linked to mileage and quality of driving, the Insurance Regulatory and Development Authority of India (Irdai) has permitted insurers to launch pay-as-you-drive motor insurance policies. The scheme allows buyers to set a mileage limit for their cars and offer discounts over the normal premium. The lower the limit translates into bigger discounts over the normal premium. The insurance is valid only up to the limit chosen by the buyer. One insurance company offers three slabs of 7,500 km, 5,000 km and 2,500 km. It will benefit customers who have low vehicle usage, take care of their vehicles and follow traffic rules.

FLOATER COVER

Just like floater health policies, the insurance regulator has also proposed floater covers for vehicles wherein vehicle owners can get several vehicles covered under a single policy. In health insurance, floater policies are very popular, but vehicles owned by a family are usually registered in different names which could be a hurdle in such floater covers.

QUALITY OF DRIVING

The 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 the driving habits of the user. The data is interpreted to give discounts to careful drivers. It can also penalize rash and negligent drivers.
 

LIMITED BENEFITS

A closer look shows that such policies can offer only limited benefits. For instance, 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.

EXCEEDING THRESHOLD

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.

PRIVACY CONCERNS

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 24x7 data on your car’s movement.