How Insurtech Startups Will Play A Key Role In Determining The Success Of New Vehicle Insurance Policy

Insurtech companies will play a key role in the new motor insurance product which will have tech-enabled ‘Pay As You Drive’ and ‘Pay How You Drive’ features as add-ons to own-damage cover.

The increasing adoption of electric vehicles (EVs) is also expected to bolster demand for this new motor insurance product.

The Insurance Regulatory and Development Authority of India (IRDAI) last week permitted general insurance companies to introduce these add-on features in own-damage cover. The regulator called it a step towards facilitating technology-enabled insurance policies.

The Role Of Insurtech In New Motor Cover

At present, there is price equity due to the lack of user behaviour-based pricing of insurance premiums. The new add-ons will make it cost-effective. They will also bring in more transparency and control over motor insurance for lower-mileage users.

The new policy will eliminate the cross-subsidy enjoyed by high-usage customers. It will possibly result in slightly higher premiums for customers of heavy usage of their vehicles.

Insurtech will have a “definitive” role to play in rationalising the product and setting up the product functioning. “The new add-ons rely on technology to define, monitor and make business sense of user behaviour, which in turn would facilitate ‘Pay As You Drive’ or ‘Pay How You Drive’ – both utility-based models,” Susheel Tejuja, principal officer, founder & managing director – PolicyBoss.com (Landmark Insurance Broker), told Inc42.

Insurtech companies can help significantly in recognising risk patterns from the telematics information, and using statistical or AI-driven models, SANA Insurance Brokers co-founder Srinath Mukherji told Inc 42.

“Over time, these approaches will help reward drivers who demonstrate lower risk behaviour through lower insurance premiums, while penalising higher risk behaviour patterns,” he added. 

This will give a further boost to the insurtech sector, which, as per an Inc42 report, is the fastest-growing fintech sub-segment in terms of market opportunity.

New Product Can Be A Hit With EVs

The ‘Pay As You Drive’ or ‘Pay How You Drive’ features require telematics and analytics. While telematics helps measure and transmit the vehicle’s performance, such as distance, average speed, and braking, among others, analytics recognises risk patterns from the telematics data.

Insurtech can help with both these elements, Mukherji noted. However, telematics devices, which need to be installed in internal combustion engine vehicles, are prone to tampering and fraud. “The launch and use of these new types of motor insurances will, therefore, increase with adoption of EVs, wherein telematics functionality is often built into the vehicle,” Mukherji said.

Sambit Chakraborty, who is on the Board of Advisors of Indigrid Technology, which assembles battery packs for electric two-wheelers and three-wheelers, concurred with Mukherji. “The chances of this being a hit, being taken up are much higher. I don’t think it will really take off in conventional vehicles, in combustion engines. But in EVs, there is a very good possibility that this could be a positive value add,” Chakraborty, who is also a consultant with Prudent Insurance Brokers, told Inc42.

Some insurers, including Liberty General Insurance, have already tested the product concept under the regulatory sandbox.

Product Details Awaited For Clarity

Currently, it is not clear if the new product will add to the complexities in claims. There will be clarity on this matter once insurers come up with detailed product features.

“More details would emerge as insurers release product features which will further elaborate the underlying role of insurtech in shaping the future of insurance product constructs,” said Tejuja.

Mukherji noted that insurtech providers can also provide real-time feedback to drivers about their driving risk patterns so that they can improve and eliminate risks.

Tech Play In Floater Policy

Technology will play a key role in the floater policy for vehicles belonging to the same individual owner for two-wheelers and private cars. The regulator last week permitted the floater policy, which eliminates the need to hold individual vehicle policies and track their renewals.

“For a single policy for multiple vehicles, an account management will best be defined using technology,” said Tejuja.