Home/ Money / Personal Finance/  Do the changes in add-on policy impact your motor insurance?

I bought a ‘Pay As You Drive’ policy three months ago. I just came to know that insurers will sell it as add-on cover in motor policies henceforth. How will this impact my current policy? Also, if the insurer will sell it as an add-on cover, does it mean an increase in premium compared to the normal motor policy? Will this  be beneficial in any way in the future?

—Name withheld on request


‘Pay As You Drive’ was first introduced by the insurance regulator in 2020 on a limited basis under a regulatory sandbox. The sandbox allows insurers and the regulator to gather market feedback for innovative measures. Seven insurers were thereafter allowed to launch usage-based motor insurance. This product was supposed to be offered for a limited period of time to a limited set of policyholders. 

Based on the market feedback, the regulator in July 2022 allowed all insurers to offer this facility to their policyholders. Each insurer has to file an add-on to implement this feature in their policy.

Motor insurance is based on a common framework, which is followed by all insurers. Add-ons are a way to make changes to this common legal baseline. You should not interpret add-on literally to mean additional premium. Objective of this add-on is to encourage more people to buy motor insurance, and increase penetration. ‘Pay As You Drive’ will help you optimize premium based on usage. So, someone who uses their vehicle less, need not pay the regular annual premium. If policyholders find that the usage-based premium is inefficient, they would still have the option to pay the regular annual premium with no linkage to actual usage. Overall, it will be a more beneficial move for policyholders and will give them more options.

The recent policy announcement would not have any impact on your existing policy. So, all terms and conditions that you signed-up for the current policy would continue as-is till the time of policy renewal.


I am 37 years old and want to buy a term insurance for the benefit of my spouse and child.   

What is the right way to select the best insurer? Term insurance is a long-term commitment and I don’t want my beneficiaries to face any difficulties in the future. 

— Name withheld on request 


One of the best ways to ascertain the insurer’s credibility is claim settlement track record of an insurer. You must choose an insurer with more than a 95% claim settlement track record. 

Another way to assess a life insurer’s customer service is the number of grievances reported against the firm relative to policies issuance by the firm. Lower the better. 

You can check the information in the annual report put out by Insurance Regulatory and Development Authority of India’s (Irdai).

Abhishek Bondia is principal officer and managing director, SecureNow.in.

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Updated: 15 Sep 2022, 11:02 PM IST
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