What is Usage-Based Car Insurance and How Does It Work?
In recent years, the advancement of technology has brought a revolution to the insurance industry. A new and innovative concept, like usage-based car insurance, is introduced for both insurers and drivers. You must be wondering, “What exactly does usage-based car insurance mean?” Continue reading to learn its meaning and how it works in detail!
What is Usage-Based Car Insurance?
This concept primarily relies on telematics and RF technology to comprehend the driving styles and habits of the drivers and provide them with insurance in accordance with the assessment. As a result, the premium amount under this type of car insurance is estimated on the basis of the driver’s personality and driving habits.
While rewarding responsible and safe drivers, this new insurance technology also serves to encourage reckless drivers to concentrate on changing their driving style. Thus, the launch aims to provide responsible drivers with car insurance policies at a discount and encourage irresponsible drivers to adopt safe driving practices.
How Usage-Based Car Insurance Work?
Usage based car insurance works differently, and the primary variables that determine its cost are the driving distance, mileage, location, time, and driving style. With the use of telematics devices, the insurance company will receive a direct transmission of the covered vehicle’s driving history. The insurance companies figure out how much each driver will pay for their premiums after keeping track of a variety of factors, including how far the car has traveled, how long it has been in use, the route taken while driving, hard braking, hard corners, airbag deployment, rapid acceleration, recorded braking history, acceleration pattern, and various other factors.
The odometer readings and other in-vehicle telecommunication devices that are already included in cars are used to gather this information. The basic idea behind this strategy is to keep an eye on how each driver drives and base insurance premiums on that. Every driver is assessed judiciously, and the policy is transparent. Some of the telematics devices used in usage-based car insurance policies are smartphones with mobile apps, 12V dongles, Bluetooth connections, black boxes, GPS devices, and on-board sensors.
Benefits of Usage Based Car Insurance
Listed below are some of the benefits of usage based car insurance in India.
- This insurance programme helps in increasing driver awareness and caution regarding their driving style and behaviour. Drivers are more cautious on the roads because the insurance firm tracks and evaluates their driving behaviours using real-time data. As a result, fewer accidents occur on the roads.
- Drivers are able to control their premium costs due to this insurance plan. The car owners must pay a lower premium for their car insurance if they drive more cautiously at a lower speed.
- Drivers will be more cautious when driving on the road, which will increase road safety. Therefore, pedestrians and other vehicle owners can walk and drive on the road with confidence due to this car insurance policy.
- The usage-based car insurance policy, in which the vehicle is constantly monitored, helps in lowering the country’s crime rate. Furthermore, new technology makes it simpler to trace and locate a stolen vehicle, which is not achievable with a standard car insurance coverage.
Usage-based insurance is gradually gaining traction in India. However, users are concerned about pricing and privacy, but insurance companies are working on it. Generally, the premium is decided by the insurance companies. But, through usage-based motor insurance, policyholders have the power to decide the premium amount and make it as low as possible.