'Pay as you Drive’ (PAYD) Add-on Cover
Are you tired of paying a fixed premium for the motor insurance policy you have availed yourself? If yes, there is good news for you as Insurance Regulatory and Development Authority of India (IRDAI) has allowed general insurers to introduce technology enabled add-on covers for own damage motor insurance policies.
In a recent notification, the regulator notified that an individual will have the flexibility to buy floater policies for multiple vehicles instead of the existing rule of availing a separate policy for each vehicle that one owns. Following the announcement by IRDAI, general insurers will be able to introduce tech-enabled concepts like – ‘Pay-as-you-drive', ‘Pay-how-you-drive', and floater policy for vehicles for the motor own damage cover.
What is ‘Pay as you Drive’ Add-on cover?
‘Pay As You Drive’ Insurance is a car insurance model where the policyholder is offered a mandatory third-party liability car insurance policy. It also offers comprehensive coverage based on the distance covered by the car.
The premium payable for the insurance policy is based on how the policyholder uses their car.
Digit Insurance has become India’s first insurer to offer the add-on cover to its customers. It can be opted by an individual who drives less than an average of 15,000 kilometres a year. We offer a discount of up to 25 per cent; however, it will be subjected to the annual kilometre slab opted for and odometer reading.
How will ‘Pay as you drive’ work?
The functioning of the new model will be slightly different from a regular car insurance policy. Let us take a look at it -
Car Usage declaration – The policyholder needs to declare the usage of the car (kilometre-wise) during the policy duration based on the usage slab provided by the insurer.
The premium charged – Based on the kilometres covered by the car during the policy period, the premium will be charged.
Features of ‘Pay as you Drive’ (PAYD)
Listed below are the features of ‘Pay as you Drive’ add-on cover:
- The tenure of the policy is one year.
- IRDAI decides the third-party premium payable for the policy
- The ‘Pay as you Drive’ insurance policy is more affordable than a standard car insurance policy.
- The own damage premium under the policy is dependent on the usage slab of the kilometres covered
- The policyholder is eligible to avail discount of up to 25% on their own damage insurance premium.
- The policyholder can customise the car insurance cover by opting for add-on covers.
How will the premiums of motor insurance policies be affected?
The launch of tech-enabled add-on covers will bring in more personalised pricing for motor insurance policies as it will be closely linked to the policyholder’s driving distance and factors like mileage, driving habit, and safe/unsafe driving. The ‘Pay-as-you-drive’ model will ensure that a policyholder need not pay a hefty premium for a motor insurance policy.
What happens if the declared car usage limit is exhausted?
If the declared car usage limit is exhausted, the policyholder can recharge it within the policy tenure or at the end of the policy tenure. The policyholder also has the option to move to a higher-kilometre usage slab or shift to regular own-damage car insurance.