Consumer Centric Innovations In Motor Insurance: The Policybazaar Show

During the lockdown, the number of people who were getting their vehicles insured was lesser. By mid of May, people started renewing their vehicle insurance. The renewal rates have touched pre-Covid levels, according to Sajja Praveen Chowdary, Head, Motor Insurance, Policybazaar. 

“This is due to the fact that people have started going to offices twice or thrice a week or for household needs. Earlier, policy renewal was 70% which reduced to 50% during the lockdown. However, mid-May onwards, it again touched 70% levels,” he added. 

The number of vehicles plying on roads is lesser because people are practicing social distancing. Therefore, a lesser number of accidents are bound to happen. A fewer number of vehicles on roads means lower risk for insurers. 

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People who are renewing their policies are careful which will reflect on their driving behaviour those lowering the risk for claims. Thus, insurers have taken an aggressive stance and lowered the prices in the last two-three months. However, once full lockdown is lifted, prices will come back to normalcy. 

PAY AS YOU USE PLAN

This is part of IRDAI’s sandbox regulations which were issued last year wherein they allow insurers to come up with innovative products for a certain period of time. Insurers have come up with 'usage-based motor insurance' policies for private car owners. This has been done keeping in mind the lesser use of vehicles in the post Covid-19 world. Currently, it is being offered on a pilot basis, wherein customers can choose various slabs as per their needs - 2,500 km, 5,000 km, and 7,500 km. 

By taking this limit, customers get extra discounts on premiums. The policy is ideal for customers who have multiple vehicles and do not use each vehicle as much or those customers who travel short distances. 

Similarly, Edelweiss General Insurance launched the Switch policy in May wherein vehicle owners are allowed to switch their motor insurance policy cover on or off depending on the use of the vehicles. Multiple vehicles can be covered under a single policy.

[ Also read | The Future is Here: Now Pay Only For Miles You Drive]

IRDAI SCRAPS LONG TERM COMPREHENSIVE MOTOR INSURANCE POLICIES 

In June, IRDAI scrapped long term policies for motor insurance. It came up with this notification because, in September 2018, a regulation was moved based on Supreme Court guidelines which said that there should be multiple years third party insurance policy which means the customer should have 3 years third party insurance policy for a brand new car and a 5-year third party policy for a brand new two-wheeler. 

Third-party insurance is mandatory by law, so if customers also want an own damage cover along with third-party insurance, which was earlier used to be 1 year's own damage and one-year third-party insurance, they had two options. For a new car owner, a three-year third party cover along with one-year own damage cover or a three-year third party and a three year own damage cover. Similarly, in two-wheelers, customers could avail 5 years third party cover along with one-year own damage cover or 5 years third party cover along with 5 years' own damage cover. 

But this was being pushed down the consumer’s throat as premiums got increased and they were losing flexibility. Let’s say if they didn’t get good service in the first year, they had a chance to switch to another insurer in the second year. IRDAI also pointed out that it was getting difficult for actuaries to price on a long term basis. 

As a result, IRDAI said that going forward, for brand new vehicle buyers, 5+5 policy and a 3+3 policy won’t exist. Consumers who buy new cars can purchase one-year own damage cover along with a three-year third party cover. Similarly, consumers who buy new two-wheelers can purchase one-year own damage cover along with a five-year third party cover. So, it's going to be effective from August 1 this year.

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