IRDAI Committee Advice Higher Insurance Premium for Traffic Violations

The Insurance Regulatory and Development Authority of India (IRDAI) set up a working committee which calls for a direct correlation between the traffic violations of an individual to the amount of the insurance premium they pay for their vehicle.

This practice is common in developed nations in the west and is especially necessary in a country like ours where rash driving is a social nuisance. India ranks first in the number of road accident deaths across the 199 countries reported in the World Road Statistics, 2018 followed by China and US. To curb this, the government has deployed intelligent traffic monitoring systems and already introduced heavy penalties on traffic violations in the amended Motor Vehicles Act, 2019. However, the need for more measures is felt.

How does the government plan to impose a higher insurance premium?

To link traffic violations, the working group proposes a system of calculating ‘traffic violation points’ based on the violations by the driver. These points would rise based on the severity and frequency of various traffic violations committed. A list of proposed offence violation points is as follows

We must note that the violation points of a vehicle would be reset after a change in the owner. On the basis of violations, the committee proposed the following penalty charges on the car insurance premium based on the points accrued by the owner. 

Total Violation Points  Two &Three Wheelers Premium Four Wheeler (Private & Commercial) Premium
Not exceeding 20
Exceeding 20, up to 40 100 300
Exceeding 40, up to 60 150 400
Exceeding 60, up to 80 200 600
Exceeding 80, up to 100 350 800
Exceeding 100, up to 300 500 1000

                      Source:( https://www.irdai.gov.in/ADMINCMS/cms/frmOrders_Layout.aspx?page=PageNo3893 )

 

 The proposed traffic violation premium is fixed by the IRDAI and would be reviewed every three years. To get an idea of how much your vehicle insurance would cost, you can use a car insurance calculator such as the one provided by Acko Car Insurance and use the tables above to calculate the additional premium cost.

Implementation mechanism

While the regulation isn’t implemented yet, the pilot project of the same is being planned in the national capital territory of Delhi for a period of 1 year.

To implement this measure, the working group has devised a data sharing mechanism between the state traffic police and the general insurers.

  1. The data of Challans issued by Delhi Traffic Police is stored by National Informatics Centre (NIC)
  2. The traffic violation data from the NIC will be shared with the IIB at the end of each day through a dedicated web service 
  3. IIB shall store the data into a database which would be accessible by general insurers through real-time web services
  4. The insurers can then use an algorithm built into the system to work as a car insurance calculator for different applicants.

Conclusion

The proposed plan to link insurance premiums to traffic violations seems like a definite measure to control rash driving. However, it remains under legislative scrutiny since it plans to penalise people for the same offence twice, through high Challans and also through high insurance costs. With such hefty premiums in place, one should try to get the best quotes for their vehicle, such as the ones offered by Acko Car Insurance available on Finserv MARKETS.

Nonetheless, it must also be noted that this plan would also require an elaborate technological infrastructure to share data and develop a car insurance calculator. Hence, this plan remains ambitious for countrywide implementation.

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