Chennai: The insurance regulator has recommended to adoption of telematics for underwriting own-damage motor insurance. This will help insurers provide customised policies based on driver and vehicle insights. Irdai has also recommended developing pricing models on assumptions based on such data and piloting a few products.

The Irdai found that in Europe, the UK, the USA and other developed markets, driver details such as age, occupation, marital status, credit history, and driving history are commonly used for underwriting purposes. Evolved insurers now consider factors such as the driver’s colour of the eye, driving behaviour and social behaviour for a comprehensive assessment of the motor risk to be underwritten.

The insurance industry would need to have free access to the data generated by multiple sources including telematics, on-board diagnostic (OBD) devices, and adaptive cruise control (ACC) fill this void by monitoring vehicles in real-time through the use of sensors.

These sensors send signals about drivers and their surroundings, which can help car insurance companies assess risks better. For example, insurers can analyze real-time driving data to determine fair insurance rates, develop tailored products, and even provide driving assistance to prevent accidents.

With the availability of technology based driver and vehicle insights, there is an ability to provide customized solutions to the consumers like PAYD (Pay as you drive), UBI (Usage Based Insurance) and PHYD (Pay how you drive).

This will help auto owners only pay the premium aligned to their driving profile and can avoid paying for coverage based on one-size-fits-all system. Besides having the potential to reward good behaviour, this also enables prevention of accidents and enables collection of data to identify risk zones for traffic policy related changes.

Given the usage of commercial vehicles and the high third party risk they carry, it would be worthwhile to examine the possibility of mandating telematics for these class of vehicles. While this not only provides better risk control, it also allows the fleet owner to manage their fleet and its performance better, found the Irdai.

“The draft opens up the possibility for innovation by allowing usage of telematics, pay as you drive, new coverages addition in liability only policy which doesn't exist as on date,” said Sajja Praveen Chowdary, Head- Motor Insurance, Policy-bazaar.com.

Key challenges linked to telematics data are ownership, data sharing and portability and privacy protection. The storage of such huge data size will incur substantial cost and, therefore, the entity managing such data needs to be duly compensated. Insurance Information Bureau of India (IIBI) which acts as data repository for insurance companies can manage this data and its protection.

While generation of telematics data will take time, insurers are encouraged to develop pricing models on some assumptions and underwriting estimates to pilot a few products. The performance of these products should be closely monitored so that potential losses could be minimized and timely corrective action can be taken, IRDAI suggested.