The Insurance Regulatory Development Authority (IRDA), keeping pace with advances in technology announced add-on covers to the Motor – Own Damage Policy; The Pay-as-you-Drive and Pay-How-You-Drive are two add-on covers intended to harness technology giving insurers the ability to customize their motor insurance.  Version 1.0 of these add-ons are based merely on declarations made by customers and providing information on odometer readings.  However, given the advances in automobile telematics, Pay-as-you-drive and Pay-how-you-drive will soon become more than just catch-words.

On-board Diagnostic and Reporting devices, GPS, and wireless communication capabilities come together to provide the ability to compute premiums based on vehicle usage, driver behavior, location, and vehicle condition. This opens the possibility for dynamic pricing of premiums based on how often owners use their vehicles. Where owners have more than one vehicle, it also gives the opportunity to apportion premiums across these vehicles based on how often each of these vehicles are used.

On-board technology can also provide information on routes through which the vehicle passes, speed at which the vehicle is driven, distance covered, and other parameters such as wear-and-tear on brakes and clutch. This makes it possible for  insurers to get even more accurate pricing algorithms that reflect the true risk to the insurance company.  Customers also benefit from customized premiums instead of the one-size-fits-all premiums that are prevalent today.

With ADAS technology getting more sophisticated in automobiles, we will have many more parameters that can be tracked for ensuring safer driving habits and adjusting premiums according to driver behavior.  For example, Heads-up-display ensures that drivers can keep his eyes on the road and not be distracted by digital information being pushed to them. It may soon be possible to correlate this data with information being passed on from wearable devices to track driver alertness, stress levels, and the like. Research has shown that installation of safety and monitoring devices improved driver behavior.  The day will not be far off, when machines will be reporting on our performance, rather than drivers reporting on car performance!

“Thank you, Mark!  It was a pleasure having you at the wheel.  You did not get distracted – the phone was on silent during the drive, you changed radio stations only once, and overall your attention to what was happening on the road was good.  You did brake hard once at the Metro Square Junction.  That could have been avoided had you slowed down as you approached the junction.  Nevertheless, overall the car handling was also good. Air pressure and other vehicle parameters are also good.  Car maintenance has also been good. Overall, you deserve a 4.5.  Good Night.”

This might very well be a report that will go out to the owner at the end of each day!  Some of that data may also go to the insurance company.  And if he has been speeding, the Motor Vehicle Department may also get notified.  Interesting times ahead!

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