From UPSC perspective, the following things are important :
Prelims level : Telematics
Mains level : Salient features of the Named Driver Policy
Soon, the way we drive will determine our motor insurance cover a/c to the Named Driver Policy.
Named Driver Policy
The ‘Named Driver Policy’ to the use of telematics data to reclassification has been recommended by the IRDAI against the own damage (OD) segment of motor insurance.
Why such move?
- Vehicle plying on the road is a risk, but the driver who drives the vehicle is a key determinant of the risk.
- Such a move is part of an effort to make pricing reflect risk, which is an international practice.
- Opting for driver information in a policy will help integrate information from government authorities, particularly about traffic violations.
Use of Telematics
- Another recommendation was adoption of telematics for motor insurance.
- Use of telematics or tracking devices will monitor the driving habits such as acceleration, and braking and will provide feedback to the driver.
- Auto owners only pay the premium aligned to their driving profile and thus avoid paying for coverage based on one-size-fits-all system.
- Telematics will eventually pave the way for a ‘Pay As You Drive’ and ‘Pay How You Drive’ model.
Benefits for Insurance companies
- Over time, with access to drivers’ or their driving habit data, insurers will be able to develop sharper risk-based underwriting practices.
- Having information about drivers, with details such as age and gender would help assess the risk better.
- Also, the insurance firm will pay the claim amount in full only if the named driver was at the wheel.