Insurance firms' trial products promise accurate price covers for policies

The pricing of health or motor insurance policies you buy currently is based on rather crude measures. A car owner, for instance, pays a premium based on the type of car he owns and its age. A health insurance customer pays a premium based on his age bracket. Thanks to technology, it is now possible to price covers based on an individual’s own behaviour or his health condition.  
 
The Insurance Regulatory and Development Authority (IRDAI) recently gave the green light to 33 products and services under its regulatory sandbox framework. Companies will run these products for six months on a pilot basis. If they work well, IRDAI will allow all companies to launch regular policies based on these ideas. 
 
The first question that arises is whether customers, if offered, should buy these experimental products at all. “Even if the idea gets dropped, the benefits you have been promised will be passed on,” says Kapil Mehta, co-founder and managing director, Secure Now Insurance Broker. Any no-claim bonus, discount or reward earned will accrue. For the sake of safety, however, check out the policy’s terms and condi­ti­ons. Next, let us turn to some of the interesting ideas that will be tried out soon.
 
Motor insurance: Eight general insurers will try out pay-as-you-drive covers. Acko General Insurance, for instance, will allow customers to buy motor cover packages based on the number of kilometres (kms), ranging from 1,000-12,000 kms. “Car owners who do not drive their car much during a year will pay a lower premium than what they do currently,” says Animesh Das, head of product strategy, Acko General Insurance.
 
In addition to measuring the number of kilometres, ICICI Lombard General Insurance’s product will also assess the quality of driving. “We will use technology to assess driving quality. Good drivers will get a better rating which will translate into a price benefit,” says Sanjay Datta, chief-underwritings, claims, reinsurance and actuary, ICICI Lombard General Insurance. Heavy or rash drivers should stay away from this product.
 
Three issuers will run pilots for motor floater policies. An individual who owns several vehicles will be able to cover all of them under one umbrella policy, with sub-limits for each. “It will allow a customer to renew the covers on all his vehicles on the same date,” says Datta. They may also enjoy price benefits.
 
Health insurance: Friends Assurance is one novel idea that will be tried out. Current products allow only family members to be part of a floater cover. This one will allow friends too. “Since a number of people will get insured at one go, a discount will be offered on premium, making it cheaper than an individual policy,” says Ashish Mehrotra, MD & CEO, Max Bupa Health Insurance. Discounts up to 10 per cent could be offered. A health coach and a wearable device will monitor the number of steps, sleep pattern, etc. The group’s cumulative score will determine the reward or discount at renewal. The health condition and propensity to exercise should be important criteria for selecting one’s group members.
Health-profile based covers will also be offered. In the current system, where premium depends on age, healthier customers subsidise the less healthy ones. “Those with a better score will pay a lower premium in this product,” says Mehrotra.
 
Co-payment based products for those with existing health conditions are another welcome idea. “People with health conditions are unable to get a cover. This product will work for them,” says Mehta.