Motor Insurance 1235 views February 27, 2020

Pay as Per Your Use: Motor Insurance

Motor or Car Insurance is an extremely crucial general insurance which all of us have and is mandatory as per the Motor Vehicles Act. Innovation and Improvisation are always a vital component in improving any products or services offered. And like many other general insurance products like health, fire, etc., where continuously products are being reviewed and restructured, motor or car insurance also has undergone a recent development which has been approved by IRDA- the governing body of all types of insurance in India.

The Change- Usage Base Model

General Insurance companies have started using a new feature of “Usage-Based” car insurance which is created on “pay as you go” theory. This would mean that you need to pay the insurance amount for the distance which your car has covered. Not every car owner uses their car regularly, but they are paying for their car insurance policy which is generally ruled by the parameter of “time”. With this new attribute, the new measurement which will be considered is “vehicle mileage” and vehicle owners who use their cars seldom will be in a position to pay less with the same kind of risk coverage as he was paying before. If you are travelling using taxis or public conveyance daily and occasionally use your private car or you often go to outskirts areas beyond the city boundaries thereby hardly using your car, or you have many vehicles, this new concept of vehicle insurance will be practical.
From a business standpoint, this new offering will attract more customers thereby increasing the customer base for motor or vehicle insurance.

How the “vehicle mileage” concept will work?

Usage-based or mileage-based car insurance will depend on the type of car which you have. You will have to disclose the present odometer reading for your car which will be seen in the schedule when you apply for the insurance. The distance covered will be checked basis the reading of the odometer if the vehicle meets with an accident and the reading taken at the inception of the policy.

Presently, the new offer is valid for Own Damage or OD of an insurance policy. General Insurers includes this as top-up which would mean that you can restore Own Damage limit thereby increasing the kilometres in lieu of an extra premium once the existing limit of your car’s kilometre is finished.

The social rationale behind the new concept

An important justification for bringing in this new idea is the lesser the car usage is, the possibility of meeting an accident will also be less. And therefore, the risk of accidents will also reduce, keeping in mind the increased number of accidents which gets recorded every day.


With the usage-based concept for your car insurance, you will be able to reduce the cost of insurance for your vehicle and thereby allocate the same to other critical needs of yours as getting the maximum benefits with the least cost is always desirable

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