Should you go for Edelweiss Switch Insurance policy?

With millennials’ familiarity of technology in mind, the IRDAI has allowed tech-enabled motor insurance covers. In a press release dated July 6, the IRDAI has permitted insurers to offer utilisation-based motor insurance. Utilisation here is measured by kilometres or days driven — ‘pay as you drive’ and by the quality of the drive — ‘pay how you drive’. The innovation helps the policyholder pay for insurance based on the usage and be rewarded for better driving discipline. One of the first products to come out was ‘Switch insurance’ from Edelweiss General Insurance, launched under the IRDAI’s Sandbox initiative. This app-based, utilisation-centred, subscription model of insurance provides many unique firsts to the policyholder. If car usage is intermittent or if the vehicle is driven by a better driver, the prospective policyholder can moderate their insurance payments.

Here’s how Switch insurance functions, and its positives and negatives.

App-based measurement

All policyholders of Switch motor insurance will need to install a related SWITCH app from Play Store or Apple’s App Store in their mobile phones. The mobile phone with the app will be the primary source to collect driving-related diagnostics. This is different from the other telemetry-based insurance products, which uses an OBD device (On Board Diagnostics) installed in the car to collect the relevant information.

The app’s description on the Store declares that no data will be shared with third-party organisations — a written declaration on data privacy. As per the management, the maps and related data will be used, if required, only for claim compensation.

All the latest mobile phones have a gyroscope installed which will be used by the app to generate a driver score. The app (which is assumed to be on the policyholder’s phone) detects motion above a certain speed. On detecting motion, the own damage cover is automatically turned on for that day and depending on the quality of the drive, a driver score will be generated. A better score should provide a lower premium to insure against own damage risk. The score weighs acceleration, angular velocity, stability, and other metrics of physical movement to quantify the direction, smoothness, and safety of the drive. Since the app is installed on the phone, messaging and calling on the drive will automatically impact the score for distracted driving. The policyholder will be able to access the score to modify and improve his driving skills with the app.

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The savings

The savings from Switch insurance can be earned in the own damage part of the premiums. Third-party premiums (constituting close to half of a typical premium payment) cannot be fiddled with, as they are regulated and standardised by the IRDAI. Regular insurance premiums price own damage covers essentially by the vehicle type, without scope for basing it on the period used or the abilities of the driver. On days when movement detected by the app is not due to policyholder’s vehicle, it will need a manual override by the policyholder to switch it off on that day, within 24 hours. This implies that on days when public or other transport is used, by manually switching off insurance for that day, savings will be accrued. Thus, if you don’t use your vehicle on weekends or other holidays too, insurance premium will not be charged.

The policyholder can also allow other designated drivers to use the insured vehicle and still get insurance cover based on the activities logged in the app. The policyholder can add phone numbers of the other drivers to authorise them.

In the pilot stages, the management noted that convenience of usage increased only when the app works automatically. That is, if a user has to manually engage the app every time they drive, there was a higher chance of missing out. To avoid this, manual intervention was brought in for switching off rather than switching on.

Own damage cover for the first and the last months are charged upfront. Later on, the own damage cover is paid as a subscription model with each month’s performance getting reflected in the next month’s premium payment. The other charges including third-party premium and any other add-on will be collected upfront, similar to regular motor insurance payments.

How it works

The innovation helps policyholder pay for insurance based on the usage and be rewarded for better driving discipline

Our view

On the whole, Switch insurance can be optimally harnessed by tech-enthusiastic driver/policyholder who is keenly aware of the cost-benefits that can be achieved by such new-age insure-tech product. The management mentions trial-runs produced savings of up to 30 per cent on own damage covers, bulk of which can be tied to off-days alone, without bringing driving quality into the picture. Not paying own damage cover for periods when the car is not used, makes sense for policyholders who are not regular users of the vehicle.

However, there are some points to ponder. Switch app is designed to be active all the time. To notify the app to disengage for off-vehicle days can be a bit of a laborious task. Also, when multiple drivers are using the same vehicle, it may be difficult to control drive quality and reap the benefits.

There could be gaps in coverage on loss of phone, phone battery running out of charge or a change in number. Also one should consider the quality of network coverage in their areas of vehicle usage for such tech-enabled policies.

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