Bajaj Allianz and Pay as You Go Motor Insurance
The nature of motor insurance has been transforming for some time now and this direction of travel has only been amplified by the fallout from the global COVID-19 crisis.
Whereas most people previously needed to use their vehicles every day for commuting and leisure purposes, we are now seeing a sharp increase in working from home, which of course doesn’t require any travelling. The nature of city life also means many people living and working in urban areas rely more heavily on public transport for day-to-day commuting and travelling. However, these people also like to keep a personal motor vehicle for out-of-town trips and other leisure activities in areas not conveniently served by public transport.
These factors, combined with a spiraling cost of living crisis, means drivers often find it hard to justify paying a regular amount for motor insurance and would instead prefer to only pay for the times they actually use their vehicles.
Pay as You Go Insurance
This need has given rise to the concept of pay as you go motor insurance. As the name suggests, drivers only pay for insurance when they use their vehicles, with the insurer relying on telematic data to assess how much driving is being conducted and bill accordingly.
"There is good news for car owners who do not drive a lot, but have to keep their vehicles insured nonetheless,” reports Business Today. "Insurers are increasingly starting to use telematics data from vehicles to determine the premium rates of motor-vehicle insurance policies based on a policyholder’s risk exposure, and the distance driven. The ‘pay as you drive’ motor insurance policies charge you a premium based on the usage of the car, which translates into a lower premium payment when the vehicle is driven less, and higher when it is driven more.”
We are now seeing this concept take off in countries such as India, thanks to the introduction and extension of a regulatory sandbox by Insurance Regulatory and Development Authority of India (IRDAI) which is giving insurers more freedom to partner with technology companies to develop solutions which allow them to offer these products.
Of course, as connected vehicles become increasingly prevalent, the ability for insurers to gather data from them will grow in sympathy and make pay as you go insurance options even more widely available than they are now. Presently, taking out this kind of insurance policy requires additional technology to be installed in the customer’s vehicle, but this will likely not be the case for much longer.
Bajaj Allianz
The first insurer company to launch its own pay as you go insurance products under this regulatory sandbox is Pune, India based, Bajaj Allianz. As one of India’s premier general and life insurance providers, Bajaj Allianz is particularly well placed to make the most of the opportunities presented by this increasingly popular motor insurance product.
Bajaj Allianz customers can now add pay as you go options to their basic plans under package product, bundled, and standalone OD cover. Customers can choose coverage based on their vehicle usage, which will then be calculated by telematic data enabled by technology allowed by the new regulatory sandbox in annual kilometers driven. Customers can also gain additional reductions in premium for their safe driving activities such as sticking to speed limits – via data gathered from the same technology.
"Pay as you [go] gives customers the flexibility to choose their insurance premium based on how they want to use their vehicle and intends to extend benefits to them, depending on their driving behavior, using telematics,” said MD & CEO, Bajaj Allianz General Insurance, Tapan Singhel. "This will also encourage customers to drive safely, thus making our roads safer in the long run.”
As the first brand to take advantage of the regulatory sandbox and offer pay as you go insurance in the region, Bajaj Allianz has positioned itself as an innovative and trendsetting player in the insurance industry. We are likely to now see other insurers in India begin offering these products which will create a snowball effect which will spread across the region.
Final Thoughts
Pay as you go motor insurance answers many of the challenges set by a customer base which does not want to pay regular premiums for a vehicle they only use a fraction of the time. By adopting practices from the world of cellular telephones and allowing drivers to only pay for the miles they travel, insurers can increase customer satisfaction, save them money, and drive new business all at the same time.
Pay as you go insurance products are sure to be part of the conversation at Digital Insurance Summit 2023, being held in May at the Hyatt Regency Austin, TX.
Download the agenda today for more information and insights.