AI and Telematics Shaping Car Insurance Premiums in India

AI-Driven Personalisation of Car Insurance Premiums

AI car insurance has gained popularity in the Indian insurance market. The following points illustrate how AI is transforming the car insurance landscape in India.   

• Calculating Personalised Premiums

Insurance companies are training their AI models with the following types of data:

• Telematics signal (car’s speed, harsh acceleration, trip timing, etc.)
• Historical claim records
• Vehicle details (car’s age, model, safety features, etc.)

This data helps AI models learn which patterns predict higher loss frequency or severity, producing individualised risk scores. It means two drivers with the same cars can now pay different premiums based on their driving. It lets underwriting shift from static to dynamic, behaviour-based pricing. 

• Reducing Fraud & Improving Claim Processing

In addition to introducing dynamic premiums, AI has also enabled motor claims automation to control fraud and improve claim processing. AI can detect fraud by scanning vehicle damage and using telematics to trace driver behaviour. The individual’s claim history can also be checked for anomalies. 

In most cases, if a claim is staged or fraudulent, AI can flag it instantly with its advanced pattern detection and automated image analysis capabilities. It protects insurers by preventing fraud and benefits honest policyholders by speeding up their claim approvals and processing.  

• Leading Insurers Using AI

Shriram General Insurance is a leading Indian insurer that provides usage-based car insurance. Its car insurance features ‘Pay-As-You-Drive (PAYD) ,’ particularly beneficial for vehicle owners who don’t use their cars frequently. 

Shriram General Insurance uses SAS Viya, a leading AI & analytics platform, to make data-driven underwriting decisions.
 

Telematics-Based Usage and Behaviour Monitoring

Insurers use telematics device(s) installed in cars to get real-time insights on mileage, car speed, crash events, instances of harsh braking, etc. This vehicle and driver behaviour data helps them create a time-series record that feeds risk scoring. 

Insurers use this score to provide personalised insurance premiums to new policyholders, ensuring fair pricing. Currently, the following two models are gaining popularity as part of the growing AI and telematics-enabled insurance in India.

• Pay-As-You-Drive (PAYD) Car Insurance

This model charges insurance premiums based on the distance a car has driven (km slabs). It particularly benefits low-mileage users.

• Pay-How-You-Drive (PHYD) Car Insurance

This model determines premium pricing based on a driver’s driving behaviours, such as speeding, braking, drunk driving, etc.  

Such behaviour-based and usage-based car insurance benefits both car owners and insurers. People who drive responsibly receive premium discounts, and insurers lower their underwriting risk by charging premiums according to individual risk profiles.
 

Regulatory and Privacy Considerations in India

While usage-based car insurance in India is gaining popularity, it isn’t free of regulatory and privacy concerns. The following points provide better insights into both. 

• IRDAI’s Role in Regulation

IRDAI issued a regulatory sandbox in July 2019  to conduct trials of usage-based car insurance in India. The goal was to allow Indian motor insurers to test these insurance models with a limited audience without having to go through lengthy approval processes. 

In July 2022, IRDAI released a circular to enforce usage-based insurance in India. Hence, you can find numerous Indian insurers providing usage-based models as add-ons to the basic own-damage covers. IRDAI’s regulatory role has significantly benefited both insurers and vehicle owners. 

• Data Privacy Concerns

While beneficial, these models are at the centre of severe data privacy concerns. Telematics devices continuously collect sensitive vehicle and driver behaviour data, which may concern some. The key concerns revolve around consent, retention, and secondary uses. 

Insurers must address these risks diligently and look for reliable solutions. They may invest in encrypted transmission, adopt strict access controls, and mitigate other risks by securing their data architectures.   

• Pilot Projects

Pilot projects were conducted during the regulatory sandbox period, but since IRDAI approved usage-based car insurance in India in 2022, several motor insurers now provide these models. The Indian insurance telematics market is also expected to grow at an impressive 21.4% CAGR  from 2025 to 2033, so consumer awareness is expected to rise steadily.
 

Conclusion

Telematics and AI-based car insurance in India is here to stay. It benefits both Indian insurers and car owners by providing personalised insurance premiums based on an individual’s driving behaviour and vehicle data. While data privacy-related challenges still exist, insurers can address them by adopting the suggestions shared in this blog. 

If you’re looking for a reliable Car Insurance partner that provides usage-based premium models, you must explore Shriram Car Insurance policies. It will give you the benefit of both generous coverage and personalisation through relevant add-on covers.
 

FAQs

1.How does AI personalise car insurance premiums?

AI uses vehicle and driver behaviour data collected by telematics and analyses it to obtain individualised risk scores. It helps them provide personalised premiums that are fair and reasonable.
 

2.What data do telematics devices collect?

They collect numerous data points, including the vehicle’s location, speed, fuel consumption, engine diagnostics, and driver behaviour.
 

3.Are telematics-based premiums cheaper?

While they’re not always cheaper, they’re certainly fair. Drivers pay only for mileage or driver behaviour, so policyholders don’t pay a higher premium.
 

4.How is customer data protected?

Insurers are adopting several measures to protect their customers’ data. Some key methods include advanced data encryption and securing data architectures.
 

5.Which Indian insurers provide tech-driven plans?

Shriram General Insurance and a few leading Indian insurers provide tech-driven plans.