Published on Jul 17, 2023
Usage-based insurance (UBI), or telematics insurance, is a type of auto insurance policy that considers the insured individual’s traditional auto insurance. It relies on general demographic information and historical claims data to determine premiums.
UBI uses real-time data from telematics devices or smartphone apps to assess risk and calculate premiums.
While it is still a relatively less used insurance product, several prominent insurance companies in India offer UBI:
- Bharti AXA General Insurance: Bharti AXA offers a telematics-based motor insurance policy called “DriveSmart.” This policy uses a smartphone app to collect data on driving behavior and offers discounts based on safe driving habits.
- ICICI Lombard General Insurance: ICICI Lombard offers a usage-based motor insurance policy called “Pay as You Drive.” It uses a telematics device installed in the insured vehicle to monitor driving behavior and provides premium discounts based on safe driving.
- HDFC ERGO General Insurance: HDFC ERGO provides a telematics-based motor insurance policy called “My: Health Drive.”
- Reliance General Insurance: Reliance General Insurance offers a usage-based motor insurance policy called “Pay-As-You-Drive.” It uses a telematics device to track driving behavior and offers discounts based on the collected data.
How has the adoption of usage-based insurance grown in India?
The adoption of usage-based insurance (UBI) in India has steadily grown in recent years. While it is still a relatively new concept in the Indian insurance market, several factors have contributed to its increasing popularity:
- Technological Advancements: The widespread availability of smartphones and the advancement of telematics technology have made it easier and more cost-effective for insurance companies to implement UBI programs in India. Telematics devices and smartphone apps can now accurately collect and transmit driving data, enabling insurers to assess risk and calculate premiums based on individual driving behavior.
- Cost Savings Potential: One of the critical drivers for adopting UBI in India is the potential cost savings for policyholders. By incentivizing safe driving habits, UBI policies offer the opportunity for individuals to lower their premiums based on their driving behavior. This appeals to cost-conscious consumers who are looking for personalized insurance options.
- Increasing Awareness of Road Safety: India has been actively promoting road safety initiatives and campaigns in recent years to address the country’s high number of road accidents. UBI aligns with these efforts by encouraging responsible driving behaviors and offering rewards for safe driving. As individuals become more aware of the importance of road safety, the appeal of UBI policies grows.
- Shift in Consumer Preferences: With the advent of digital transformation and changing consumer expectations, there has been a shift in the way people perceive and interact with insurance. Customers now seek personalized and flexible insurance options that align with their lifestyles and preferences. UBI caters to this demand by offering tailored coverage and potential cost savings based on individual driving patterns.
While the adoption of UBI in India is still relatively modest compared to traditional insurance policies, it is expected to grow further as more insurance companies introduce UBI offerings as consumer awareness and acceptance continue to increase.
Here are some suggestions to increase user adoption and usage of UBI in India:
- Consumer Awareness: Educate the customers about the benefits of UBI, such as personalized premiums, safe driving incentives, reduced frauds, and better claims management
- Subscription Options: At the initial stages of adoption, it is essential to help users with various payment structures to assuage fears. Similar to the “try and buy” and “cash on delivery” models adopted at the beginning of e-commerce shopping in India, companies can provide various types of UBI products to suit different customer segments and preferences, such as Pay as You Drive (PAYD), Pay How You Drive (PHYD), Pay as You Go (PAYG), and Distance-based Insurance.
- Transparency: This form of insurance relies on the free flow of data using technology to collect and analyze it. For example, with mobile apps, plug-in devices, GPS devices, onboard sensors, mileage detection, etc. Communication on how the data is used through videos, informational widgets, or notifications helps ensure the customer is aware of the data privacy and security measures undertaken by an insurer.
- Leveraging Channel Partners: UBI requires a robust ecosystem for easy adoption. Companies can partner with OEMs, dealers, aggregators, and other stakeholders for UBI distribution and service.
UBI is relatively new in India but is gaining popularity among car owners who want more control over their insurance costs. The way forward for UBI in India depends on several factors, such as adopting telematics technology, the regulatory framework, consumer awareness, and market competition. UBI has the potential to transform the car insurance industry in India by making it more transparent, fair and customer-centric
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