The automobile industry in India largely works on traditional, tried and tested methods. The method of premium calculation, claim settlement, and renewal have remained standard for years.
An insurance company fixes the premium rate for auto insurance based on several factors. This includes the age and gender of the customer, his/her driving history, the area of registration of the vehicle, the make and model, the engine capacity, etc. After evaluating the information provided by the customer, the car insurance company would ascertain the risk he/she poses to the company. Even if he/she falls in the “safe driver” category, there could be an instance in the future wherein he/she would be at fault for a road accident.
The Indian car insurance domain has recently been introduced to the usage-based insurance technology. This facility allows a telematic device to be installed in the insured car which will help the insurance company in monitoring the driving habits of the customer. If you drive safe most of the time, your discipline on the road may earn you lower insurance premium.
How It Works:
Usage-based insurance makes use of the technology of Internet of things (IoT) to evaluate behaviours of multiple drivers in multiple locations. The mileage and driving behaviour of the driver are tracked through an odometer or an in-vehicle telematics device that is installed into a specific port in the car. The telematics device measures a number of parameters that would be of interest to underwriters:
- The distance driven
- The time of the day
- Locations where the vehicle was driven to (through GPS)
- Hard braking
- Increased speed
- Hard cornering
- Air bag deployment
The extent of data collected is largely based on the telematics technology that is being used by the insurance company. It also depends on the extent of information the driver is willing to share. The insurer assesses the collected data and charges the insurance premium based on that. This ensures that safe drivers enjoy lower premiums when compared to drivers who are rash on the roads.
The growth in technology has made the facility more effective and it is now available at reasonable costs in certain countries. Variations of the UBI service such as Pay-As-You-Drive (PAYD), Pay-As-You-Go, Pay-How-You-Drive (PHYD), and distance-based insurance have gained a stronghold there.
DriveSmart from Bajaj Allianz:
The first UBI programs were introduced in the United States in 2007 and it has made an entry into India through the DriveSmart facility offered by Bajaj Allianz. This is a voluntary program that you can opt to enrol into. The information collected by the DriveSmart device includes:
- Vehicle diagnostics - This indicates the condition of the vehicle’s battery and engine based on real-time feedback.
- Driving pattern and statistics - This collects the top speed that the car has reached, the distance travelled on a daily basis, and the longest trip taken. It also has an interactive map that shows the driving activity of the customer.
- Geo-fencing and tracking - This collects the last seen location of the vehicle and shares it on WhatsApp, email, and sms.
Additionally, the facility also has the following features:
- Document wallet - This provides car information to the driver in the form of alerts, such as expiry date of the PUC, insurance policy, and license.
- Customisation - This module enables the driver to create custom trips and view it on a map. He/she also has the option to share the trip on social media.
- Alerts and notification - This provides alerts to the driver, some of which include overspeeding alert, notification of unauthorised movement of the car, low battery alert, recommended servicing date alert, towing notification, etc.
- Support - Customers can ask a query to an automobile expert, report bugs, and suggest new features.
Also Read: Benefits of Bajaj Allianz Car Insurance
How To Install Drivesmart:
- The customer will have to download the Insurance Wallet app or login to the customer portal at the Bajaj Allianz website.
- He/she is then required to type the DriveSmart policy number and click on the DriveSmart option seen on the page.
- The device ID should also be entered (this is present on the DriveSmart device).
- After this, the device should be plugged in to the OBD port in the vehicle.
- It will then be possible to use the device.
Impact Of IoT On The Indian Auto Insurance Industry:
In the traditional method of assessing the risk of a customer, the focus was more on the car rather than the driver. This is because the risk profile of a driver could not be easily ascertained. The practical uses of the IoT technology renders it a more viable solution that could rule the industry in the future.
Benefits To The Insurance Company:
The automobile insurance industry is based on the fundamental principle of calculated risk. The premium rate offered to an individual is based on the likelihood of that person filing a claim in the future. The IoT technology has ushered in a positive change in the industry.
- Insurers are now able to manage the pre and post sales services in a better manner, while effectively mitigating risks.
- The driver risk assessment will be more accurate than the traditional method.
Benefits To The Customer:
The IoT device that is installed in a vehicle will give a clear picture of the driving pattern of the customer to the insurance company.
- Parameters such as the average speed of the vehicle and usage of brakes will assist in getting a clear assessment of the risk profile of the driver. Based on this estimated risk, the insurance company can determine the future cost of car insurance. The cost determined this way is bound to be more accurate. This indicates that it will be more fair on the driver than imposing a generalised price. The affordability of the insurance coverage for low-risk drivers will also improve.
- The improvement in transparency of the entire process will boost customer satisfaction.
- When a good driver is rewarded with lower premiums, this will go a long way in improving the overall behaviour of the driver. Through the facility, drivers are incentivised to adopt safer driving habits. Hence his/her risk factor will improve progressively.
- Safer driving habits also help in bringing down the number of road accidents, vehicle emissions, and congestion in the country. This is highly beneficial to the society as well.
Practical Applications Of The Technology:
The Internet of Things technology will be very useful to a customer in the field of car insurance, particularly during the time of a car breakdown. Listed below are some of the practical uses of the technology:
- Occurrence of an accident - An IoT device in a vehicle is useful in providing real-time information to the customer and the insurance company. When the customer receives information about the condition of various parts, warning signs, and the like, he/she will be better prepared to avoid accidents in the future.
- Assistance in emergency - In spite of the warning signals, if an accident/peril occurs, the IoT device will send a notification to the insurance company. The nearest service centre will also be intimated on the emergency situation. This is expected to reduce the reach time of the emergency facilities or roadside assistance service to the place of occurrence of the incident.
- Inspection of the incident - In countries where the technology is used widely, drones are programmed to locate and identify damages to the vehicle. This replaces the need for a traditional surveyor/inspector to visit the garage and create an inspection report. This speeds up the entire inspection process and also provides accurate reports to the insurance company.
- Damage repair metrics - Using the services offered by the IoT device, customers can track the status of damage repairs on the vehicle and get an approximate date for the completion of repairs.
- Detection of fraud - When compared to the international insurance market, insurance companies in India incur heavy losses every year on the basis of fraudulent claims. The IoT technology has the potential to reduce the instances of fraud in the car insurance domain. This facility enables insurers to be well aware of the existing issues in an automobile. This way, they can easily differentiate between the new and old damages and expedite the processing of a claim.
- Tracking stolen vehicle - One of the most significant benefit of the telematics technology is the ease with which it enables stolen vehicles to be detected and recovered. The safety of the driver is also monitored to a certain extent.
- Efficient routes - Using the technology, fleets are able to identify routes that would work out to be most efficient. This saves the company costs pertaining to gas, personnel, and maintenance.
Challenges Face By IoT:
- The feature of tracking driver behaviour and mileage has raised several concerns regarding customer privacy. This can be mitigated by limiting the amount of data that insurers collect. With the growth in the acceptance of information sharing (as is witnessed through the popularity of GPS devices, smartphones, and social media) the technology is poised to see tremendous growth.
- Implementing telematics service can be costly to the insurance company. This may also require the insurer to allocate additional resources for the program, particularly if the company has no past UBI experience.
- There is also a level of uncertainty surrounding the technology, as it is still an emerging proposition. There needs to be sufficient research on how data will be integrated into the existing structures so that insurers can maintain profitability.
Telematics, based on Internet of Things, is a phenomenal change that is sweeping across the global auto insurance industry. If insurance companies integrate the service to their business models, they stand to gain big, as it promises a win-win situation for service consumers and providers alike.
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