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. 

Following the announcement by IRDAI, general insurers will be able to introduce tech-enabled concepts like – ‘Pay-as-you-drive', add on cover for the motor own damage cover.

‘Pay as you Drive’ add-on cover ensures that the policyholder is eligible for discount on the payable premium of the Own Damage cover of the base policy. Opting for this add-on cover means that you are declaring and confirming that the vehicle will be run for a certain number of kilometers as per the plan opted by you. 

The premium payable for the insurance policy is based on how much kilometers the policyholder drives his/her 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 Pay as You Drive  will be slightly different from a regular car insurance policy, however there will not be any difference in the coverage provided. The basic difference will be on the validity of the section I – Own Damage of the base policy. The coverage under Section I- Own Damage Section of the base policy will be available maximum till the kilometres as per plan opted by the Policyholder (i.e., kilometres as at the time of inception of the policy + kilometres policyholder agree to drive during the policy period) or the Policy Period end date of the base policy as mentioned in the Policy Schedule, whichever is earlier. 

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 appropriate discount on the Own Damage premium of the base policy will be provided.

• The coverage under Section I - Own Damage Section of the base policy will be available maximum till the kilometres as per plan opted by the Policyholder

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. 

• 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. 

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?

The Insured will have an option to top up kilometers to continue coverage under section I of base motor policy if the kilometer under the basic plan is exhausted.  The policyholder also has the option to move to a higher-kilometre usage slab or shift to regular own-damage car insurance.