Merging two key trends in personal transportation in India: “Transportation as a service” and “user based insurance”

Have you ever wondered, when your driver took your car to pick up your children from school and something unfortunate happens, what will be covered by your vehicle insurance?

When you rest a car from a self-driving car rental company for your next vacation, are you able to get a better rate for the rental insurance because of your impeccable driving etiquettes?

Why cannot you move your No Claim Bonus from your old car to a new car when you upgrade?

Are you considered a “third party” while taking an app based taxi ride to work, from insurance prospective?

You have hired a driver or called in someone from an service provider temporarily. What is your legal liability towards your paid driver?

Are you aware, if your car is not self-driven you need to buy a cover for your driver, under the Workmen Compensation Act. The size and premium for this cover are both fixed. Now, let’s look at the components of personal transport in its many forms that can individually be insured. And segregate them with the variances or risk that decides the premium.

When one purchases a personal vehicle, the vehicle is bough in owner’s name. Whether the owner is also a driver or not, is not checked. The registration is in the name of the owner.  The vehicle is insured based on the make and price and linked to the registration number. Although a list of demographic details of the owner is acquired by the insurance company, such as age, marital status, usage etc. those are not factored scientifically in to the risk assessment. On top of that, many elements are added on to the base package. Such as third party insurance (which is mandatory now), while third party is defined as some of outside of the vehicle. This specifically excludes the driver and the co-passengers. There are other add on elements like 24×7 road side assistance, which is a flat charge, not linked to the condition of the vehicle or past record of failures.

Most metropolitan owner-drivers are calling in an app based “Driver by hour” in the evening hours way back from office, if they had to take a couple of drinks in a business social. Car-pooling, shared transport is increasingly common place. Self-driven rental cars are gaining momentum in India.

The only element that plays a role in discounting the premium of a car today in India is NCB or No Claim Bonus. But even that is attached to the registration number, not to the driver who was at the wheel when the accident happened.

It also does not reflect, if the accident was because of a fault of another driver. All it tracks today is whether the owner of the vehicle claimed any insurance for any covered damage to the car. The urban personal transport in India is mostly self-driven and personally hired driver driven vehicles. However, it is changing rapidly.

Most metropolitan owner-drivers are calling in an app based “Driver by hour” in the evening hours’ way back from office, if they had to take a couple of drinks in a business social.  Car-pooling, shared transport is increasingly common place. Self-driven rental cars gaining momentum in India. It is just matter of time before companies provide self-driven, app based city transport in line of Zipcar, USA are available in India as buying and owning a personal vehicle becomes more and more expensive, cumbersome and most importantly unnecessary.

There is a clear trend towards “Transport as a Service” and congested cities and crumbling infrastructures of India would need to make this transition sooner than later. The millennials are increasingly looking to free themselves from the hassles of owning a vehicle. So the fundamental way to address all the changes in the transport trend, we need to separate the insurable components of personal transport. The vehicle and The Driver of the vehicle and connect them using technology.

Logging-In to your vehicle as a driver

The missing piece to make Usage Based Insurance (UBI) a possibility for the era of “transport as a service” is the ability to Log-In to the vehicle when a driver takes the driving seat. The same way one logs in to his computer.

When a driver A, drives a vehicle X, the telematics related to driver behavior (sudden breaks and accelerations, speed in different zones etc.) can be linked to the national records of driver A using the Adhaar based platform. Based on analytics and usage driver A can be charged the premium whenever drives a car, be it rental or self-owned or owned by someone else that authorizes him to drive this vehicle. The premium can be purely based on the time he is driving the car and not an annual contract.

Similarly, each car builds-up an history through its telemetry, accidents, service record, usage pattern, etc. that accurately describes the risk of insuring just the vehicle. The technology needed to enable login to a car is fairly inexpensive today. Tying that information to vehicle telemetry and exporting them to a multi-tenant storage would provide true User Based Insurance for all kinds of transportation model.

A small step for a brighter future

The Motor Vehicle Act 1988 is a 30-year-old instrument which had not kept pace with the change of dynamics of road transport & information technology.  However, recently the Indian cabinet has approved the Motor Vehicle (Amendment) Bill 2016. Apart from 16 key amendments that brings in e-governance and stricter stance towards traffic violations, it also brings in a key requirement that provides for linking of driving license and vehicle registration with Adhaar-based platform. The original intent being better governance and speed of execution such as online issuance of learner’s license, or avoidance to duplicate driving license issuance etc. However, intentionally or unintentionally this change helps build a unique platform to radically change the way personal transportation is changing in this country.

In that sense, the Motor Vehicle (Amendment) Bill 2016 is a welcome change.

India has a head way because of the Motor Vehicle Amendment 2016, that is linking Aadhar to driving license as well as registration of the vehicle. Mandating a simple Log-IN facility to every new vehicle (just like we mandate an emission cert or a seat belt) via policy, and with help of existing telematics and cloud technology, we can build a country of disciplined drivers, decongest our cities and make our roads safer and our commutes predictable.