Driving Behaviour and Its Impact on Car Insurance Premium

Car insurance serves as a safety net that ensures financial & legal protection for car owners in the event of road accidents or other unforeseen events. The driving record of an individual is one of the essential aspects insurers consider when calculating car insurance costs. Insurance companies check the driving history of car owners to assess risks and decide their premium costs. This article sheds light on the role of driving behaviour in determining the final car insurance premium price.

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How Driving Behaviour Affects Car Insurance Premium?

With the challenging road conditions in India, going through the driving history is crucial for insurers to check if you were involved in frequent accidents. Here's how your driving behaviour influences the premium cost of your car insurance policy and the key factors insurers consider when deciding your premium:

1. Over-speeding and Rash Driving

   If your vehicle number has multiple challans for over-speeding, your insurer might charge you with a higher premium. Responsible driving lowers the risk of accidents and penalties for rash driving or over-speeding.

2. Traffic Violations

   The installation of advanced surveillance systems in all major metropolitan cities has enabled insurers to check for traffic violations. Even the Insurance Regulatory and Development Authority (IRDAI) now allows insurance companies to check the violation history of drivers through the Parivahan e-Challan system, helping them determine the insurance premium based on the frequency of violations by you.

3. Claim History

   For every claim-free year, insurance companies reward policyholders with NCB (No-Claim Bonus). Raising frequent and minor claims indicates that you are a reckless driver, which significantly impacts your driving & claim record. With a safe driving history and fewer claims, you can enjoy NCB benefits with up to a 50% discount on car insurance premiums.

4. Drunk Driving

   Driving under the influence of alcohol or drugs indicates carelessness. Any offence while drunk driving can result in hefty fines, suspension of a driving licence, or even potential imprisonment. Moreover, if the insurer finds such records, your policy premium will likely increase significantly.

5. Car Usage and Mileage

   The car usage purpose is another aspect that influences its insurance premium. If you use your car for commercial purposes or frequently travel long routes, you fall in the high-risk category, leading to a higher car insurance premium due to more exposure to risks.

Usage-Based Insurance: A Transformative Force in the Insurance Sector

The IRDAI (Insurance Regulatory and Development Authority of India) has permitted all general insurance companies to offer Pay As You Drive insurance (PAYD) and Pay How You Drive (PHYD) insurance.

The premium for PAYD car insurance is determined based on the number of kilometers driven by the insured. On the other hand, for the Pay How You Drive Insurance policy, the premium is based on driving behaviour.

Under the usage-based car insurance policies, the insurers collect vehicle data through a mobile app, an in-built telematics device, or an OBD device to track certain parameters, such as-

• Driving speed
• Braking patterns
• Use of phone while driving
• No. of kilometres driven

Here's a scenario for better understanding:

You work from home and only drive on weekends, staying within the speed limit and following traffic rules. On the other hand, your friend commutes to work and covers long distances with heavy traffic, frequent brakes, and occasional speeding.

Since you drive less and follow safe driving behaviour, your car insurance premium will be lower. On the contrary, your friend, who drives more frequently and is exposed to heavy traffic conditions, is at greater risk of accidents and claims, resulting in a higher premium.

Usage-based car insurance models are slowly gaining traction, and insurance companies are increasingly focusing on effectively implementing them. But, the collection of vehicle data by insurers has raised privacy concerns among individuals. Insurers are working on addressing these concerns, aiming for a win-win situation for both car owners and insurance companies.

Tips to Reduce PHYD Insurance Premium

You can follow these responsible driving habits to reduce the insurance premium-

1. Stay Focused

   The major cause of accidents in India is distractions. Drivers who use their mobile phones are more likely to be involved in road crashes. Even there are many other sources of distractions that might indulge others in danger. To avoid this, here is what you should consider:

   1. Make it a habit of enabling your GPS to plan your trip ahead of time
   2. Avoid answering calls or replying to emails or text
   3. Avoid eating or drinking while you are driving or waiting at the traffic light

2. Stay Calm in Traffic

   Traffic jams are another cause of accidents. After seeing the congestion, the drivers aggressively accelerate and try to cut off the other. After all, it is a matter of patience to reach the destination.
   Try to be polite to make your drive more pleasant and help prevent accidents. Moreover, keep a safe distance between you and the vehicle in front of you. Do not honk unnecessarily, it only creates fuss in the middle. Use your turn signals to be safe on the road.

3. Do Not Rush

   Another crucial tip for everyone is to never rush. Over speeding is another cause of road accidents. Always respect the speed limits. Take your time & adapt defensive driving techniques as this will help you avoid situations where you have to suddenly apply your brakes and stop the vehicle.

4. Never Run If You Are Feeling Sleepy

   Fatigue is one of the frequent causes of road accidents. Make sure you have enough sleep before hitting the road. Dizziness and restlessness might deviate you from the lane, or it might trouble you in keeping your eyes open. Hence, take a good rest and decrease the risk of accidents.

Conclusion

Driving habits do not change overnight, but with time you can inherit good ones. If you are planning to buy the recently introduced PAYD car insurance, make sure you have a good driving history. Moreover, you can also pay attention to the above-mentioned tips and save significantly on your car insurance premium.