Why is telematic insurance not becoming popular among car owners?

No Fault Rule: Unlike other countries where the person driving the vehicle is insured, in India only the vehicle is insured. In addition, the Indian Motor Vehicles Act 1988 has included no-fault liability claims, in which accidents without any negligence are compensated based on a pre-determined structure. This means little or no focus on individual driving behavior, which is a key component of telematics-based insurance plans.

Multiple Drivers: In India, a car is used more as a family driven vehicle and hence the same car is driven by different individuals with different driving behaviours. This makes accurate interpretation and attribution of different behavior patterns on the same car difficult for insurance considerations as part of a telematics setup. This can be problematic when it comes to accurately assessing risk and setting insurance premiums.

Privacy concerns: Telematics insurance involves the collection and analysis of personal data, which raises privacy concerns for some car owners. While data privacy laws exist to protect individuals, there is still a perception that telematics technology is invasive and not transparent. This could lead to reluctance among car owners to share their driving data with insurers. For some people, the fact that all their driving habits and routes/destinations are being tracked by their insurer isn’t very appealing.

No clear tangible benefit to the policyholder: While telematics insurance has the potential to lower insurance premiums for safer drivers, not all insurers have the same way of interpreting and using telematics data. This means that since different insurance companies interpret and use telematics data in a non-standardized manner, there is no clear benefit that a policyholder can enjoy regardless of his or her choice of insurance company. In India, the No Claim Bonus (NCB) is calculated on the basis of claim behaviour, and for telematics insurance to be successful, a tangible benefit like NCB has to be established at the industry level. Only when the benefits of telematics insurance can be realized by all or most insurers can real benefits be derived.

cost prohibitive: In India, most car owners are more price conscious than price conscious when it comes to buying insurance. Telematics insurance requires hardware such as sensors and cameras to track and analyze driver behavior, which can increase the overall cost of insurance premiums. This can make telematics insurance cost prohibitive for some car owners, especially those who are already struggling to pay for their insurance.

Data Interpretation Accuracy: Driving and road conditions vary widely in India. An incident like hard braking on a highway can easily be attributed to driver’s behavior, but it can also be caused by an animal suddenly crossing the road. Such distinction of events and accuracy of tagging cannot be achieved using telematics alone. Also, complexity in driving patterns due to multiple drivers can lead to false claims while analyzing telematics data only and drawing conclusions.

For telematics insurance to gain popularity, several changes need to be made. Insurance products will have to change to incorporate telematics technology with sensors and cameras. The technology would need to be cost-optimized, and a clear benefit to the policyholder would need to be established. Data privacy concerns will need to be addressed, and the accuracy of data interpretation will need to be improved.

Lastly, while telematics insurance has the potential to revolutionize the auto insurance industry, it still has a long way to go before it gains widespread popularity among car owners in India. As technology continues to advance, it is likely that telematics insurance will become increasingly important in ensuring the safety and well-being of drivers on the road.

Sushil Tejuja is the Founder and Managing Director of Policyboss.com