The IRDAI or Insurance Regulatory and Development Authority of India is always working on setting the best practices to ensure the best services to you as customers. Now the Authority has plans to make improvements to the vehicle insurance industry. IRDAI will soon finalize the report on ‘Black Box’ for vehicle insurance. The regulatory body expects to come out with the final report regarding usage of telematics device for vehicle insurance by the end of the current year. Also, the insurance regulatory body has asked insurers to come up with standard products. This move has to be taken to ensure that you are clear on what you are buying and that there are lesser mis-selling of products, which is a norm in the industry.
As per IRDAI, the products being sold by vehicle insurance companies should be of a standard. This would ensure greater levels of transparency and avoid misleading the policy buyers. If you were to invest your money in a Fixed deposit, you know the terms and conditions. Thus, you can confidently choose an insurer and invest. But the same is not applicable for vehicle insurance as of now. Should insurers standardize their products? Absolutely not! You as a policy buyer can purchase a third-party insurance from any insurer without having to worry about the terms and conditions.
What is Proposed?
There are few proposals to enhance the safety of people and vehicles on the road. One such proposal is the introduction of a black box in a vehicle. At present, a motor vehicle insurance is sold based on parameters such as the geographical location of the vehicle, the vehicle’s model, engine capacity and so on. While these parameters are important for selling an insurance, insurers have no data on how a policyholder drives their vehicle on the road.
There are still a lot of unknown parameters which can provide critical information to the insurers before selling a vehicle insurance. These parameters include information such as frequency of driving the vehicle, the type of roads it is driven on, the duration and distance for which they are driven for, maintenance cycles of the vehicle, driving habits of the policyholder or driver, etc. When an insurer factors in these parameters, it will allow them to do a much better and pragmatic risk assessment, as to the current guessing game. With better risk assessment, insurers can provide better pricing for products as well.
What is Telematics in Cars?
The obvious next question you might have is what is telematics in cars? Well, it is a small device keeps a track of the various vehicle parameters and can make life’s easier for everyone involved. Regular reports of driving behavior and patterns for the driver can motivate them to drive in a more responsible and better way. Thus, using the data from the telematics insurance can be a good move in the right direction.
Telematics in cars is simply the addition of a black box that collects information against predefined KPIs. The KPIs can then be used to derive a lot of useful information. You can use the information for the following:
- better understanding of your driving behavior
- estimate replacement of parts more accurately
- reduce the downtime of the vehicle to a greater extent
- can use them for driving coaching
- Insurers can use the date collected to better assess accidents and rate drivers based on their driving habits.
Installing a black box in your vehicle is not a complicated process and one wouldn’t even realize that it is on. Most of the devices can be installed within a few minutes and the data can be transmitted to mobile devices.
Since vehicle insurance comprises of a large chunk of general insurance, modernization and adoption of newer technologies can lead to optimized operations. And the fact that vehicle insurance was responsible for close to 40% of all the premiums collected for general insurance, the idea is further accentuated. Once the report is out and accepted by insurers, telematics has the capabilities to change the vehicle insurance segment for the good.