I bought the ‘pay as you drive’ policy three months back. I just learned that the insurers will sell it as an add-on cover to motor policies from now on. How will this affect my current policy? Also, if the insurer will sell it as an add-on cover, does it mean an increase in premium as compared to a normal motor policy? Will this be beneficial in any way in the future?
—Name withheld on request
‘Pay as you drive’ was first introduced by the insurance regulator in 2020 on a limited basis under a regulatory sandbox. The sandbox allows insurers and regulators to collect market feedback for innovative measures. Subsequently, seven insurance companies were allowed to introduce use based motor insurance. This product should have been offered to a limited group of policyholders for a limited period.
Based on market response, in July 2022, the regulator allowed all insurers to offer this facility to their policyholders. Every insurer has to file an add-on to implement this feature in their policy.
Motor insurance is based on a common framework, which is followed by all insurers. Add-ons are one way to make changes to this common legal baseline. You should not take add-ons literally as extra premium. The aim of this add-on is to encourage more people to buy motor insurance and increase the penetration. ‘Pay As You Drive’ will help you optimize premium based on usage. Hence, one who uses his vehicle less, need not pay regular annual premium. If policyholders find that the usage-based premium is disabled, they will still have the option to pay the regular annual premium regardless of actual usage. Overall, this will be a more beneficial move for the policyholders and will give them more options.
A recent policy announcement will have no effect on your existing policy. Therefore, all the terms and conditions that you have signed-up for the current policy shall continue till the time of policy renewal.
I am 37 years old and want to buy a term insurance for the benefit of my spouse and child.
What is the right way to choose the best insurer? Term insurance is a long term commitment and I do not want my beneficiaries to face any hardship in future.
– Name withheld on request
One of the best ways to gauge the credibility of an insurer is through the claim settlement track record of the insurer. You have to choose an insurer with more than 95% claim settlement track record.
Another way of assessing a life insurer’s customer service is the number of complaints the firm has reported against the firm in relation to the issuance of the policy. better less.
You can check the information in the Annual Report given by the Insurance Regulatory and Development Authority of India (IRDA).
Abhishek Bondia is the Principal Officer and Managing Director of SecureNow.in.
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