Car, Two-Wheeler Insurance: How Does 'As You Drive, How You Drive' Work?

What are the new policies? How do they affect you? Here’s everything you need to know. Image used for representation.

(Photo: PTI)

Vehicle owners can now take advantage of their driving behaviour pattern, general upkeep of vehicles, vehicle usage pattern, among other things – to avail cheaper insurance policies for their cars or two-wheelers.

The Insurance Regulatory and Development Authority (IRDAI), in their circular dated 5 July 2022, permitted insurance companies to offer add-on concepts – called “pay as you drive,” “pay how you drive” – as part of the motor insurance package.

What are the new policies? How do they affect you? Here’s everything you need to know.

What is the ‘pay as you drive’ policy?

This policy will allow consumers to pay for their insurance, according to car usage in terms of distance. The insurance paid will be in proportion to the distance a car travels, ie, if you drive your car less, you will pay less for insurance.

Under this policy, a consumer will have to give an estimated declaration of planned usage to the insurance company, which will be recorded using tech such as a geotagging app.

What about ‘pay how you drive’ policy?

This policy means that the insurance amount will be adjusted according to the driving pattern and vehicular health. If a person drives fast and rash, they will have to pay extra compared to someone who drives safely.

The customers will have the option of getting their speed and usage tracked. Based on these variables, the insurance provider will come up with pricing.

What is the floater policy?

This is similar to the floater health policy.

If a vehicle owner owns multiple vehicles both four-wheelers and two-wheelers, they can get the same cover for all vehicles.

How will these policies affect you?

The ‘pay as you drive’ policy will reduce the insurance burden on owners who do not drive their vehicles as much. It will be costly for owners with high vehicle usage.

The ‘pay how you drive’ policy will benefit drivers who do not drive at high speeds or in a rash way but will prove costlier for those who do. It will also benefit owners who have better vehicular health. This policy in particular will facilitate safer driving and reduce pollution due to better vehicular upkeep.

The floater policy will make it easy for owners with multiple vehicles as the need for buying and tracking individual insurance policies will be removed making it extremely convenient.

“On the flip side, such a move will eliminate the cross-subsidy currently enjoyed by high-usage customers, possibly resulting in slightly higher premiums for this set. How it adds to complexity in claims will emerge once insurers release product details,” said Susheel Tejuja, Founder and MD, PolicyBoss.com (Landmark Insurance Brokers) told The Indian Express.

What role does technology play in these insurance schemes?

According to The Indian Express, these products will need Telematics – a mix of telecommunications and informatics that is used to keep track of driving-related data. This technology will also be needed to store data, and store a person's driving patterns.

This is done with the use of devices – whose installation is included under the insurance policy.

When can I avail these policies?

While some insurance companies have already devised such products, others are planning to launch these add-ons in the upcoming weeks. You can check with your insurance company about the same.

(With inputs from The Indian Express)