Innovation and disruption are knocking the doors of the motor insurance industry. Usage-based car insurance is gaining in popularity globally, and now comes to India as well.
Pay for the distance, a new feature launched by Liberty General Insurance (LGI), is a type of usage-based car insurance. In this scenario, insurance cover is provided to the policy holder on the basis of the distance they choose or wish to travel. This type of car insurance is gaining in popularity because of the benefits that come with it, the obvious one being the lower premium for those who are not frequent users of their vehicles.
Traditional car insurance is not dependent on the amount of driving a policy holder does. However, when a policy holder opts for pay for the distance feature, and if they are keen on cutting down their car usage, the feature incentivises such an idea. This results in huge savings for those who actually need to channelise that money elsewhere. In an indirect manner, such a fear can also play a role in lowering road congestion and emissions, a very real problem for our times.
Own damage insurance
Traditionally, the premium for own damage portion is based on the vehicles model and age. The pay for distance feature will draw more people to opt for OD insurance. Third party insurance cover is mandatory for vehicle users on Indian roads. From September 1 2019(1), policy holders have been able to get standalone annual own damage cover for their vehicles. This was mandated by IRDAI, which lets insurers give out standalone own damage policies irrespective of whether they are new or old, annually. The introduction of pay for the distance will incentivise more car drivers to opt for OD insurance.
Thrust on customer centricity
The pay for the distance feature in the car insurance policy is also a tribute to the customer. It is the insurers way of tipping their hat to the concept of customer centricity. Todays customers expect businesses to be intuitive and predictive, and provide solutions to pain points they arent even aware of yet. The pay for the distance feature is one such dynamic solution, where the user is firmly in the drivers seat. It is the policy holder who gets to decide how much to use the car and pay accordingly.
How did pay for the distance evolve?
Last year, the Insurance Regulatory and Development Authority of India (IRDAI) announced a regulatory sandbox method to encourage innovation in insurance. It received 173 applications, out of which 33 proposals have been given the go-ahead. The pay as you drive option is one of those given the nod.
Features of the LGI car insurance customised policy
- According to LGIs new pay for the distance policy, a policy holder can opt for the new feature under the own damage (OD) portion.
- There are also additional features such as roadside assistance services and no-fault protection and an easy top-up option.
- The roadside assistance cover is an inbuilt feature and is offered within a 50-km-radius from the place of the cars breakdown.
- The no-fault protection feature allows a policy holder to avail the no claim bonus during renewal in spite of claiming loss or damage if the damage is only to the windshield by an external object or if the loss is due to natural disasters, while the vehicle was parked.
- The easy top-up feature is useful for policy holders who want to increase their number of kilometres, to make sure they continue to be insured. They can increase the limit they had opted for as part of the pay for the distance feature once it is exhausted. They would need to pay an additional premium for the same to stay insured.
Key takeaway
If you want to know more about the pay for the distance feature, check out LGIs car insurance policy. As a policy holder, how much you drive and how much you pay for your insurance cover is now entirely in your hands.