Usage-Based Insurance (UBI) is a new type of auto insurance. In this model, premiums depend on real driving behavior, not just traditional risk factors. Also called pay-as-you-drive (PAYD) or pay-how-you-drive (PHYD), UBI uses telematics. It tracks data like:
- Distance traveled
- Driving speed and acceleration
- Braking patterns
- Time and location of driving
By leveraging real-time driving data through GPS devices, mobile apps, or connected vehicles, insurers can offer personalized premiums. Safe and low-mileage drivers may benefit from reduced premiums, while risky drivers may see higher costs.
UBI helps improve road safety, save fuel, and cut costs. Becoming popular, especially in cities and with young drivers.
In today’s digital era, technological advancements are reshaping almost every industry. The Indian insurance sector is also witnessing a huge shift that is changing how we perceive insurance coverage. Traditional insurance coverage uses a ‘one-size-fits-all’ model. Many now view pricing based on general risk profiles as ineffective.
With new technologies like the Internet of Things (IoT) and artificial intelligence, companies now base coverage on data insights. This makes them highly personalised, fairly priced, and most effective.
Yes! Usage-based insurance policies like these are gaining momentum. Read to know more!
Usage-based insurance is a special type of insurance. The cost relies on data about how policyholders behave, use, and their habits. In usage-based auto insurance, also known as telematics auto insurance, various technologies track vehicle usage and driving habits.
Researchers collect data on various metrics, such as mileage, speed, driving time, and braking patterns, to analyze the risk. Insurance companies create auto insurance plans using real-time data. They set prices fairly based on how much you drive and the actual risk.
Diverse tipos de seguro basado en el uso (UBI) existen. These include Pay as You Drive (PAYD), Pay as You Go (PAYG), and Pay How You Drive (PHYD). You can select suitable UBI insurance based on usage and the parameters that the policy considers for pricing.
In PAYD, distance driven is the major parameter for premium calculation. PHYD takes into account driving patterns for premium calculation. Lastly, PAYG considers both distance-driven and driving patterns for pricing. You can compare various telematic insurance plans on the Secure Now platform to make a rational decision.
How does Usage-Based Insurance Work?
Let us understand the concept of usage-based insurance through an example. Let’s assume Mr. A and Mr B use their car to travel to the office every day, which is almost the same distance. However, Mr. A is an experienced driver, maintains a speed limit, and drives smoothly. On the other hand, Mr B has a new driver who applies sudden brakes, and he has yet to become an expert at driving.
In this case, the insurance company charges Mr. A a lower premium than Mr. B. This is because data shows that Mr. B is more likely to make claims since he is a new driver. Premium relies completely on data-driven insights.
Are you wondering how researchers collect this data? An automated process exists. The insurance company can track your driving-related or health-related data using various technologies. Some of them are:
- Plug-in device: A small device (like a pen drive) that tracks the usage and can be easily self-installed in your car.
- Wearable devices: Like smartwatches and fitness bands can track your activity and health. They monitor things like heart rate, steps, and calories. This data helps set prices for telematic health insurance.
- Mobile app: The insurer asks you to download a mobile app on your smartphone to track your car’s movement. In telematics health insurance, apps can track your sleep, steps, and activity. They use built-in sensors to collect data for risk assessment. However, this may not be an accurate and reliable option.
- On-board or OBD sensors: These sensors can be self-installed onto the car to track the driving data. You can also share the information on a real-time basis.
- Telematic devices: Your insurer gives you a Blackbox that you need to install in the car. The device records all the driving-related information and provides accurate data to the insurance company.
- GPS device: Advanced GPS shares the driving information and real-time data with the insurance company.
In India, the insurance regulator IRDAI has played an important role. It supports new products to meet the changing needs of the market.
What are the Benefits of Telematics Insurance?
This innovative insurance type offers numerous benefits to the policyholder. Here are some of them:
- It helps you get personalized coverage based on how you use your car and your healthy lifestyle.
- It rewards safe driving and a healthy lifestyle with lower auto and health insurance premiums. It also encourages good driving habits and promotes preventive healthcare via data insights.
- It offers transparent pricing on the insurance and boosts customer loyalty with the customised rate of premium.
- It makes claim management easier for insurance companies and reduces fraudulent claims.
- If you do not use your car often, you can pay a lower premium for auto insurance based on your usage.
Conclusion
In conclusion, usage-based insurance policies are becoming popular. They offer fair prices, save money, and provide personalized service.
They base their approach on data. Products like UBI insurance match global trends. They also address the unique challenges of different Indian customers.
FAQs:
Q) What role does the Insurance regulator play in promoting innovative products like telematics insurance?
The Insurance Regulatory and Development Authority of India allowed insurance companies to experiment with tech-driven products by introducing sandbox regulations that promoted innovation.
Q) How does telematics health insurance work?
In health insurance, researchers collect data on health metrics. This includes blood pressure, heart rate, physical activity, and sleep patterns. People use devices like smartwatches, fitness trackers, mobile apps, glucose monitors, pulse oximeters, and smart scales for this. Researchers analyse the collected data, and they curate and price personalised health plans accordingly.
Q) What is usage-based insurance (UBI)?
UBI is a kind of auto insurance. Your premiums depend on how much and how safely you drive. Telematics tracks this.
Q) How does usage-based insurance work?
It uses GPS or mobile apps to gather driving data. This includes speed, distance, and braking patterns. It then adjusts premiums based on this behavior.
Q) Who should choose usage-based insurance?
Low-mileage drivers, students, urban commuters, and safe drivers can save significantly with UBI policies.
Q) What devices are used for usage-based insurance?
Insurers typically use OBD-II devices, GPS-based trackers, or mobile apps to monitor driving habits.
Q) Is usage-based insurance cheaper?
Yes, it can be cheaper for drivers with good habits, minimal mileage, and safe driving records.
Q) Is usage-based insurance available in India?
Yes, many insurers in India are now offering UBI, especially for private cars, via mobile-based telematics.
