Pay Less Premium on Your Car Insurance When You Drive Less, Drive Safe
Pay Less Premium on Your Car Insurance When You Drive Less, Drive Safe
Increased adoption of work-from-home culture, hybrid work models, and rising fuel costs have brought down personal car usage significantly. With no need for the daily commute, many working professionals are letting their cars rest in the garage. Are you one of them? If yes, know that under such circumstances, you can save money on your car insurance policy premiums.
The Insurance Regulatory and Development Authority of India (IRDAI) allows you to opt for usage-based insurance (UBI) or telematics-based motor insurance covers such as Pay How You Drive (PHYD) and Pay As You Drive (PAYD) covers. Such insurance policies allow you to decide how much to spend on motor insurance.
Here is all you need to know more about usage-based car insurance.
What is usage-based car insurance?
Usage-based insurance determines your insurance premium based on how much you drive your car. It does not charge you a fixed amount as a regular car insurance policy.
Such insurance is also known as Pay How You Drive (PHYD) and Pay As You Drive (PAYD) insurance.
These plans reward you for your good driving behaviour by allowing you to save on premiums. Insurance companies offer both mileage-based and driving-habits-linked discounts.
The two main factors affecting your UBI premium include—distance travelled and your driving behaviour. Braking patterns, acceleration rates, phone use, and driving speed are other factors that insurers consider when calculating insurance premiums.
Today, insurance companies can easily track driving patterns and gather data on driver behaviour. On-board diagnostic (OBD) sensors, telematics devices, GPS devices, plug-in devices, and mobile apps help them record data to determine UBI premium.
In addition, the “connected car” feature in some newly-launched car models captures driving behaviour. Besides, OBD devices and other odometer reading devices help to record the kilometres driven.
Telematics tracks and shares driving data through informatics and telecommunication. Moreover, driving data such as usage frequency, acceleration, braking, and speed is collected via advanced analytics. Telematics compiles the driving data and transmits the info to the insurance company for big data analytics.
Insurers use this data for analysing driving behaviour, determining the risk profile of the driver, and calculating the premium. Therefore, if you are a safe driver, you will not have to pay as much premium as a rash driver. Furthermore, you can avail of insurance options such as Manage How You Drive (MHYD).
Your driving information is recorded via online platforms and apps for premium calculation as part of UBI plans. This way, you too can learn about your driving habits and improve them, thus, earning discounts on future premiums.
Different types of usage-based car insurance
There are three types of UBI plans—Pay How You Drive (PHYD), Pay As You Drive (PAYD) and Pay As You Go (PAYG). PAYG is a combination of PHYD and PAYG.
- Pay As You Drive (PAYD)
Pay as you drive insurance is an optional policy. It calculates premiums as per the distance travelled by the vehicle. Such policies help to reduce premiums for customers who have more than one car or do not drive regularly.
PAYD used telematics devices and other technology for tracking how often you use your car via the total number of kilometres travelled. Some features of PAYD include:
- One-year policy tenure
- Cost-saving benefits because it is available at a lower price than a standard motor insurance policy
- Third-party premium benefit
- Links own-damage premium to the distance covered by the vehicle
- Add-on options such as engine protection cover, zero depreciation cover, and return to invoice cover
- Pay How You Drive (PHYD)
The pay how you drive (PHYD) insurance charges premiums based on how you drive your car on the city roads. Under PHYD plans, you pay a lower motor insurance premium if you drive safely as compared to rash drivers.
The telematics device uses GPS technology to gather data about your car’s health, driving metrics, and other info. Once the data is collected, it is used to calculate your unique driver score.
For a good driver score, you are rewarded with insurance premium discounts at the time of your car insurance policy renewal. On the other hand, you do not get the benefit of lower insurance premiums if you have a poor driving score. Even so, you can use your driving score to improve your driving habits.
Benefits of usage-based insurance
Some of the benefits of UBI include:
- Offers rewards: With a good driving record, you become eligible for a customised premium rate.
- Promotes better driving habits: You can improve your driving skills by learning from your driving data.
- Assists in probes during accidents: The telematics data helps in ascertaining the reason behind accidents, thus, preventing future accidents.
- Helps to recover stolen vehicles: Location tracking makes it possible to recover stolen vehicles.
- Lowers claim frauds: Insurers can use telematics data to trace fake claims.
- Enhances customer loyalty: Customised discounts and insurance premiums can help to build a pool of loyal customers.
- Easy claims: By recording and tracking driving data, insurance companies can manage claims more efficiently. Moreover, such data is useful for inspecting and verifying vehicles.
There is no reason why you should pay a high premium for a sparsely used car. By opting for user-based insurance, just pay what deserving premium and continue enjoying the benefits of robust car insurance.
