Car insurance premiums are influenced by more than just the make and model of your vehicle. Insurers also consider how you drive when calculating your premium. Safe driving keeps you and others protected on the road and can lead to significant savings.
In recent years, technology has enabled insurance companies to assess driving patterns more accurately, making your behind-the-wheel behaviour more important than ever. Read on to explore the impact of driving habits on car insurance premiums.
Impact of Driving Habits on Car Insurance Premiums
Your driving habits directly affect how much you pay for car insurance, as insurers assess risk based on how safely and responsibly you drive. Here’s how different aspects of your driving behaviour can influence your premium:
- Over-Speeding and Rash Driving: If your vehicle has multiple challans for speeding or reckless driving, insurers may categorise you as high-risk and charge a higher premium.
- Traffic Violations: With advanced surveillance and access to the Parivahan e-Challan system, insurers can check your history of traffic offences. Frequent violations, such as signal jumping or not wearing a seatbelt, can increase your premium.
- Claim History: Drivers who file frequent or minor claims are seen as risk-prone. This affects your eligibility for a No-Claim Bonus (NCB), which can offer up to 50% discount on premiums for claim-free years.
- Drunk Driving Offences: Incidents of driving under the influence of alcohol or drugs can lead to increased premiums, policy exclusions, or even denial of coverage due to the high risk involved.
- Car Usage and Mileage: Driving a high annual mileage or using your car for commercial purposes puts you in a high-risk category, as more time on the road increases the likelihood of accidents, thus raising your premium.
- Driving Frequency and Behaviour: Insurers using telematics or app-based tracking assess how often and safely you drive. Frequent hard braking, rapid acceleration, and cornering may increase premiums, while smooth driving can earn discounts.
- Location-Based Risk: Driving in congested urban areas with higher accident rates may result in a higher premium than driving in quieter, low-risk regions.
Safe driving habits help reduce claims and keep premiums in check, which is beneficial not only for your safety but also for your finances.
In fact, recognising the link between individual driving behaviour and insurance risk, many insurers are now shifting towards more tailored pricing models. This brings us to usage-based car insurance, which offers a more personalised approach to calculating premiums.
How Do Usage-Based Car Insurance Reward Safe Drivers?
Usage-based insurance (UBI) is an innovative approach to car insurance in which premiums are calculated based on how and how much you drive rather than following a one-size-fits-all model.
This system offers a more personalised and fair method of determining insurance costs, with two key variants- Pay-As-You-Drive insurance and Pay-How-You-Drive insurance.
- Pay-As-You-Drive (PAYD): This focuses on the number of kilometres driven. If you don’t use your vehicle frequently- say, you work from home or only drive on weekends- your premiums could be significantly lower because your time on the road is reduced.
- Pay-How-You-Drive (PHYD): This model is not about how far you drive but how well you drive. Factors like your average speed, braking habits, mobile phone use while driving, and adherence to traffic rules are all analysed to determine your premium.
Both PAYD and PHYD rely on telematics technology. Insurers gather data through in-built car systems, OBD (On-Board Diagnostics) devices, or mobile apps that track and transmit your driving data, like speed, distance, braking patterns, and travel time.
As usage-based insurance gains popularity in India, especially with IRDAI allowing insurers to offer both PAYD and PHYD policies, insurance companies are working towards addressing concerns about transparency and data security for policyholders.
Tips to Reduce Car Insurance Premiums with Good Driving Record
Maintaining a clean driving record is an effective way to lower your car insurance premium. Insurers reward safe drivers with better rates, seeing them as lower-risk customers. Here are some tips to help you drive responsibly and cut down on your insurance costs:
- Avoid Distractions While Driving: A leading cause of accidents is distracted driving, especially due to mobile phone use. Plan your route using GPS before starting your journey, avoid using your phone while driving, and never eat or drink behind the wheel.
- Practice Patience in Traffic: Aggressive driving in traffic jams, like rapid acceleration, honking excessively, or cutting lanes, can lead to accidents. Stay calm, keep a safe distance from other vehicles, and always use indicators to signal lane changes or turns.
- Stick to Speed Limits: Speeding increases accident risk and affects your insurance record. Drive within posted speed limits and use defensive driving techniques to handle unexpected situations calmly.
- Avoid Driving When Fatigued: Sleep deprivation can impair your reflexes and judgment. If you’re feeling sleepy, delay your trip. Drowsy driving can lead to serious accidents and affect your driving record.
- Follow Traffic Rules Strictly: Adhering to road regulations reduces the chances of being fined and lowers your risk of collisions. Avoid jumping signals or violating lane discipline, as multiple offences can reflect poorly on your driving history.
- Maintain Road Safety Practices: Drive at a stable speed, keep a safe distance from other vehicles, and avoid sudden braking. These habits contribute to a positive driving profile, which insurers favour when calculating your premium.
- Clear Any Pending Traffic Fines: If you’ve been issued a traffic challan, ensure it’s paid on time. A record of unpaid fines can negatively impact how insurers assess your risk.
- Drive Less and Use Your Vehicle Smartly: Reduced usage can also lower your premium, especially under usage-based insurance policies. You could benefit from lower rates if you only drive occasionally or cover fewer kilometres.
- Opt for a Higher Voluntary Deductible: Choosing a higher deductible—the amount you pay out-of-pocket before insurance kicks in—can reduce your premium. However, it means bearing more costs in the event of a claim.
- Install Safety Features: Equipping your car with anti-theft devices or advanced safety systems shows insurers you’re taking precautions, which may help reduce your premium.
- Choose the Right Vehicle: Premiums can vary depending on your car. Hybrid and electric vehicles may be eligible for eco-discounts, and well-maintained used cars are often cheaper to insure than new models.
Your driving habits have a direct impact on your car insurance premiums. Insurers assess your risk based on your driving behaviour, and safe driving can lower your premiums. Avoiding distractions, following traffic rules and maintaining a safe speed can help keep costs down.
With the rise of telematics-based insurance, insurers can track your driving in real-time, making it even more important to drive responsibly. By practising good habits, you can reduce your risk and premiums.
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