Pay-How-You-Drive (PHYD) car insurance uses telematics to offer personalized premiums based on driving behavior, promoting safer habits and enabling cost savings for responsible drivers across India’s evolving insurance landscape.
20 Jul 2025 | 5516 Views | By Pooja Yadav, Zuno General Insurance
Car insurance has traditionally relied on a set of fixed factors, often overlooking the individual habits of drivers. However, Pay-How-You-Drive (PHYD) car insurance is revolutionizing the industry by using telematics to tailor premiums based on driving behaviour, allowing safer drivers to pay less. With the help of technology, PHYD is ...
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Car insurance has traditionally relied on a set of fixed factors, often overlooking the individual habits of drivers. However, Pay-How-You-Drive (PHYD) car insurance is revolutionizing the industry by using telematics to tailor premiums based on driving behaviour, allowing safer drivers to pay less. With the help of technology, PHYD is making car insurance more personalized, fair, and rewarding. It’s no longer just a mandatory expense; it’s a chance for drivers to save while practicing safer driving.
What is PHYD Car Insurance?
PHYD car insurance is a new approach tailored for the modern driver. Unlike traditional insurance policies, which typically determine premiums based on a static sum assured without considering how much or when you drive, PHYD uses telematics technology to monitor your driving habits. This includes factors such as speed, braking patterns, distance travelled, and even the time of day you drive. These metrics are then used to adjust your premium, with safer driving resulting in lower costs.
According to a recent report, 90% of respondents supported Usage-Based Insurance (UBI) like PHYD, with 80% expressing interest in adopting it. This highlights the growing appeal of personalized car insurance models in India.
Rising Demand and Market Adoption in India
The demand for PHYD insurance is gaining momentum in India, driven by rising awareness of personalised insurance and increasing smartphone and GPS adoption. According to an internal survey, 70% of respondents expressed a strong intention to purchase usage-based insurance (UBI), and 58% were aware of UBI options. The IRDAI has also encouraged insurers to explore telematics-based offerings, reflecting a broader policy push toward tech-driven insurance. As urban mobility continues to evolve and digital tools become mainstream, PHYD is poised to capture a significant share of India’s car insurance market in the coming years.
Benefits of PHYD Car Insurance
That personalized premium setting is perhaps one of the best benefits PHYD insurance can offer. Normal insurance policies will compute your premiums according to age, gender, and the area in which you live. PHYD, however, looks at how you drive and gives lower premiums to those who drive safely.
Additionally, PHYD encourages safe driving. Monitoring driving habits encourages caution, leading to fewer accidents and lower premiums.
This is very much applicable in a country like India, where road safety remains a big concern overall. According to the official data available till 2023, over 1,7 lakh people lost their lives in road accidents in India, averaging 474 fatalities daily, highlighting the urgent need for better road safety and insurance models like PHYD. Thus, its policies can prove to be helpful in minimising these behaviors by giving a reward for safer driving.
PHYD car insurance encourages safer habits by tracking driving patterns through telematics, often leading to fewer accidents. Safe drivers can save between upto 30% annually, while low-mileage users benefit from lower risk-based premiums. Most insurers also provide driving insights, helping users monitor and improve their performance.
Savings Potential
The savings potential with PHYD car insurance in India can be substantial. Many drivers who drive responsibly can expect discounts of up to 30% on their premiums. This could mean savings of anywhere between Rs 1,500 to Rs 4,000 annually, depending on the insurance provider and your driving behavior.
Insurers in India also offer "safe driving rewards", which increase as you consistently demonstrate good driving practices. The longer you stay accident-free and follow safe driving habits, the more you could save. The IRDAI reports that telematics-based insurance policies have the potential to reduce premiums by up to 40% in the long term for consistently safe drivers.
How to Get Started with PHYD Car Insurance?
Once you’ve chosen an insurer, you’ll be asked to install a telematics device in your car or download an app on your mobile. This will track your driving data and help insurers determine your premium based on your behaviour.
Next, focus on improving your driving habits. Avoid speeding, practice smooth braking, and limit your driving at night. By doing so, you directly influence your premium and maximise your savings.
Final Thoughts
PHYD car insurance offers an innovative and fair approach to car insurance in India. By rewarding safe driving behaviour, it helps drivers save money while also promoting road safety. With increasing adoption, PHYD is poised to transform car insurance in India by making premiums fairer and roads safer.
If you’re interested in PHYD, research the policies available in your area and consider how your driving habits can reduce costs while contributing to safer roads across India.
Pooja Yadav is a Chief Product Officer at Zuno General Insurance. Views expressed are the author's personal.