Violating Traffic Rules? You might end up Paying a Higher Motor Insurance premium

Motor Insurance

The Insurance Regulatory and Development Authority of India (IRDAI) continuously makes changes in insurance plans to make them relevant to the changing dynamics of the market. Recently, with respect to motor insurance plans, IRDAI appointed a working committee to draft a proposal which would link your driving history to your motor insurance premium. Let’s have a look at what the committee has proposed.

Proposals of the working committee

  • A new section called the ‘Traffic Violation Premium’ (TVP) would be inserted into a motor insurance policy’s premium break-up. This section would record additional premium payable depending on your history of traffic violation
  • The TVP section would be included in both comprehensive and third party liability plans
  • The history of traffic violations over the last two years would be considered 
  • In case of new vehicles, the TVP would be applicable from renewal
  • In case of second-hand vehicles, the TVP would be calculated after the vehicle has been sold to another individual. It would be applicable at the time of renewals
  • Even if you give your vehicle to another individual, any offence committed by another driver would reflect on your policy premium

How would be the TVP calculated?

To calculate the Traffic Violation Premium payable by you, a point system would be devised. There would be specific points for a specific violation. For example, according to the draft designed by the committee, 100 points would be allotted for drunk driving while wrong parking attracts only 10 points. The points would keep on accumulating over the policy year for the violations that you make. On renewal, the points would be aggregated. If you have up to 20 points, additional premium would not be charged. However, if your points are 21 or more you would have to pay the additional Traffic Violation Premium.

For two-wheelers, the additional Traffic Violation Premium ranges between INR 100 and INR 750 while for four-wheelers, both private and commercial, the premium can range between INR 300 and INR 1500.

How would the system work?

The committee stated that the Insurance Information Bureau (IIB) would co-ordinate with the traffic police of different States as well as the National Informatics Centre. The IIB would collect the data of traffic violation and calculate the violation points of every vehicle. This information would, then, be shared with general insurance companies offering motor insurance policies so that they can charge the Traffic Violation Premium when they issue the policy for the respective vehicle. 

Objective behind this move

The main objective behind implementing the concept of Traffic Violation Premium is to make individuals aware about traffic rules. This move is expected to reduce traffic violations and make Indian roads safer. The additional premium would discourage traffic offenders who manage to dodge traffic penalties as their insurance policy would become expensive for their habits. 

In many foreign countries, the motor insurance premium is linked to the driver’s driving history and by bringing this system in India, IRDAI is trying to match motor insurance policies with international standards.

What it means for you, the customer?

As a customer, you can benefit from a reduction in premium if you have a clean record. Though the committee has not mentioned it in their proposal, experts believe that insurance companies would give good drivers a discount in their premium while penalizing offenders. So, if you clear your driving history, you can benefit from reduced motor insurance premiums.

Though the proposal is still in the development stages, it is expected to be rolled out, on a pilot basis, in National Capital Territory Delhi. So, let’s see when and how the proposal unfolds but for now, try and avoid traffic violations as much as you can. If the proposal is implemented, your traffic history would increase your premium. 

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