The insurance regulator IRDAI has issued an exposure draft on telematics, suggesting that motor insurance premiums in future may be determined through black box-based real-time monitoring of driving habits, vehicle usage and distances covered.
The IRDAI, inviting feedback, seeks to know among other issues, why a careful driver who doesn’t cover many miles and drives predominantly during off-peak hours should pay the same premium as someone who drives recklessly. At present, motor insurance in India is priced based on parameters like the make and model of the vehicle, its capacity, and the geographical use, reported Press Trust of India.
With telematics, motor insurance premiums could be directly proportional to the performance and usage of the vehicle, said the regulator which currently sets tariffs for motor third party liability insurance.
The smart system could be used to retrieve stolen vehicles and guide drivers as to efficient routes. Telematics will also help insurers improve segmentation of customers by assessing risks more accurately.
“Telematics helps insurers estimate more accurately accident damages and reduce fraud, allowing analysis of driving data (such as hard braking, speed and time) during an accident,” the regulator said.
But the IRDAI also noted that there could be issues surrounding data privacy and what data can be shared and what cannot.
Another challenge would be to get the devices fitted in the vehicle by a professional installer, so as not to affect the performance of the vehicle. Many people are reluctant to insert a telematics device in their car for fear of losing their warranty.
Last year, Bajaj Allianz General Insurance became the first insurer in India to launch a telematics solution for retail customers.