The concept of installing GPS devices in cars to track vehicle usage in determining motor insurance premium has not taken off in India despite attempts by general insurers.

Insurers attribute the failure to the low ticket size of motor insurance policies and relatively high cost of safety devices. For example, the annual premium for a private care is typically around ₹5,000-6,000, around the same as the cost of the GPS device.

The advantage of usage-based insurance is that it results in cost savings for customers who use their cars within city limits, whereas at present all motor insurance policyholders are required to pay the full premium.

Telematics

Many general insurance companies had conducted pilot studies where a new technology called telematics was installed in cars. A GPS device was used to monitor the usage of the vehicle and driving habits of the car user to determine the motor insurance amount. The GPS device gathered data based on the mileage and routes taken. The insurance company then tried to price the cover based on these parameters.

Vijay Kumar, chief technical officer of motor insurance at Bajaj Allianz General Insurance, said it is a new development, which is now gaining popularity in many countries. He added that where the premium ticket size is very high, the customer finds it logical to fit these devices in the vehicle.

Kumar said motor insurance premium in the Indian market is very low (1.5 per cent of the value of private cars, 0.8 per cent value of commercial vehicles) with heavy discounts thrown in, as a result of which customers consider installing these devices an unnecessary hassle.

Future Generali, which was one of the first companies to run a pilot for the last two years, managed to collect data for a pricing model.

KG Krishnamoorthy Rao, MD and CEO, Future Generali Insurance, said that while technically the concept can be implemented, the insurance regulator felt the Indian market is currently not ready for such a product.

Liberty Videocon General Insurance, which had conducted pilots in two cities, has not seen a positive customer uptake, said Roopam Asthana, MD and CEO.

“The customer uptake has not been very positive because they do not a see value in the overall proposition as in the financial plan the motor premium is very small. The customer is also reluctant to allow any infringement of his privacy, as the data goes to the company. And without the customer’s consent we can’t implement it,” said Asthana.

Madhukar Sinha, National Head - Personal Lines, Tata AIG, said that while the price of the tracking device, at around $100, was a deterrent, insurers can look at using GPS technology in smart phones, which is free.