IRDAI permits insurers to launch 'innovative' motor insurance add-ons

The new electric Ambassador car will be manufactured from the Uttarpara plant of Hindustan Motors in Kolkata. (Image credit: @hvgoenka)

The Insurance Regulatory and Development Authority of India (IRDAI) has decided to allow general insurance companies to offer new, add-on covers along with motor policies' own damage component. That is, you can buy these optional covers along with your base policy by paying an additional premium.

New offerings on the anvil

IRDAI said its objective was to facilitate deeper motor own damage penetration in the country.

"The advent of technology has created a relentless pace for the insurance fraternity to rise up to interesting yet challenging demands of the millennials. The general insurance sector needs to keep pace with and adapt to the changing needs of the policyholders," the insurance regulator said in a circular.

"Introduction of the above options will aid in giving the much-needed fillip to motor own damage insurance in the country and increase its penetration."

The add-on plans approved for now are 'Pay-as-you-drive', 'Pay-how-you-drive' and single floater policy for a retail policyholder's multiple two-wheelers or cars. For instance, at present, the own damage premium is linked to vehicle age, make and model. But if you opt for 'Pay-as-you-drive', premiums could be linked to kilometres or duration for which the car has been in use. "It is a welcome move by the regulator, especially at a time when the pandemic has changed the way we work and travel. These add-on covers will appeal to customers who are working from home more often, thus making car insurance cost-effective for them," said Udayan Joshi, President, Underwriting and Reinsurance, Liberty General Insurance.

Car users who do not drive frequently will benefit as currently, they  premiums linked to the age, the make or model of their vehicle. "With the new IRDAI guidelines, customers will benefit and will have control over the upfront insurance cost as the premium will be based on the kilometres driven by the vehicle," said Ashwini Dubey, Head, Motor Insurance Renewals, Policybazaar.com. It will also help insurers assess the risks better.

Pilot products in 2020, now full-fledged add-ons

In 2020, the IRDAI approved similar add-ons under the regulatory sandbox framework where companies could launch products in pilot mode. Now, they can launch full-fledged plans without prior IRDAI approval under the 'Use-and-file' regime.

Under the sandbox regime, some insurers offered covers that linked premiums to driver behaviour. So, if you are an efficient driver who is a stickler for traffic rules, 'Pay-how-you-drive' could reward you for your good driving behaviour.

A motor floater add-on will let you cover your multiple vehicles under a single cover. You can switch this on or off, depending on your requirements. So, you can choose the vehicle to be insured by intimating the insurance company every time you use it. This could mean lower premiums for policyholders who own more than one vehicle.

However, the features and offerings of new add-ons will be clear only after insurance companies roll out their products in the days to come.