Telematics Based Insurance Premium

It is mandatory for all the vehicles plying on Indian roads to be insured as per the Motor Vehicles Act, 1988. In India, a comprehensive car insurance policy pricing is done based on various factors. Some of the factors that are considered for risk assessment in pricing mechanism are car’s make and model, fuel type, vehicle age, owner driver’s occupation, age, location and driving history etc. This existing mechanism based on general statistics and vehicular data makes newly qualified and young drivers pay more for car insurance premiums. Now that IRDAI (Insurance Regulatory and Development Authority of India) is planning to introduce telematics-based insurance policies, pricing of policies would take more driver-centric approach. Let’s take a look at this concept in detail, where you can pay as per your driving pattern; since IRDA planning telematics-based insurance premium.

What is telematics insurance?

Telematics insurance policies are the ones that are priced based on the driving pattern as indicated by a smart device fitted on to your car. ‘Telematics’ or ‘black-box’ is a small and smart device that is fitted to your car that records distance, speed of your car and tracks your car’s movement. With the help of this device you can prove yourself as a safe and cautious driver.

How does telematics insurance work?

Working of the telematics insurance policies are quite simple. A black box installed in your car tracks the movements through GPS system and provides enough data for insurance companies to assess your driving pattern and style. Installed telematics box acquires driving data on real time basis though sensors and transmits those data via wireless medium. Black box or telematics box measures various aspects that helps in pricing of the policy. Some of the things that insurance companies take in to consideration while pricing the telematics insurance policies are:

• Location you travel
• The speed at which you drive on different kinds of roads
• The distance travelled by you or total mileage
• The time of day and night you drive
• Monitoring of braking and cornering through motion sensor
• Types of roads that you frequently travel

With all this information, insurance companies can assess the risk of comprehensive driver profile and pricing will be done accordingly. With this standardised and transparent system of pricing, as a vehicle owner you can clearly assess your driving performance in each category as you will have access to the data. With this, you can improve your driving score to get the car insurance policy at an attractive and lowered rate of premium. This simply means, the premium payment for your car insurance will be completely based on your own driving pattern.

How does this concept affect your premium?

The telematics-based car insurance premiums are completely technology driven. It is a technology that demonstrate the ability of owner driver and responsibility that he shows behind the wheels. Let’s say, you are not a frequent traveller on dangerous roads, then premiums charged for you are lower relatively. You can also reduce your premium by reducing your night travels. Risk assessment and premium calculation will be based on your driving pattern as recorded by the telematics box installed to your car. That means, it is a standardised concept that rewards safe driving with lower car insurance premium. These policies are particularly suitable for inexperienced, newly qualified and young drivers.

Pros and Cons of telematics car insurance policy

Telematics insurance is based on real-time data assessed by the clever device that takes more standardised and accurate approach of pricing the car insurance policy. With this, you pay for your current driving behaviour rather than making payments based on mere statistics and vehicular parameters. This can also help to minimise the fraud and estimate accident damages accurately in case of an accident. Every concept has its own challenges and cons. being a digitalized concept, there is risk of data protection and high cost of devices can outweigh the potential benefit of premium savings.

Now, that Indian Insurance Regulator IRDAI is going through the final reports on telematics insurance, premium payments will be based on your driving pattern when the product comes on floor. This may also improve and better overall driving behaviours of people.

Conclusion

 As IRDAI is planning to introduce this standardised digital product in car insurance space, pricing of policies would become more accurate as the risk is assessed based on real time data. However, to get the full benefit of any car insurance policy, it’s important to shop around, research and compare to arrive at the best suitable policy. Telematics-based insurance premium may certainly help people save on yearly car insurance cost. It can actually help you to save money to be a better driver and pay as per your driving pattern; as IRDA planning telematics-based insurance premium.