Soon, you may face additional motor insurance premium for violating traffic rules

The working group committee set up by the Insurance Regulatory and Development Authority of India (irdai), to examine and recommend the linking of motor insurance premiums with traffic violations, submitted its report and addendum, on 18 January.

The committee has recommend inserting a fifth section to motor insurance called, traffic violation premium, in addition to motor own-damage (OD) insurance, basic third-party (TP) insurance, additional third-party insurance and compulsory personal accident premium.

Naval Goel, CEO and founder, PolicyX.com, said now customers will have to pay more attention to their driving and cases of traffic violation may reduce. “A good step as safe drivers will be able to get better rates and aggressive drivers will shell out more. That is better in terms of risk bucketization and pricing," he said.

Evaluation

The Insurance Information Bureau of India (IIB) will coordinate with various states’ traffic police and National Informatics Centre to capture the traffic violation data, calculate violation points of each violating vehicle and make this information available to all general insurers through IT system integration with insurers, according to Irdai’s draft proposal.

So how will IIB evaluate traffic violation rules?

IIB will maintain the historical traffic violation data of all vehicles. However, traffic violation in only the past two years, from the date of the insurance proposal, will matter for traffic violation premium. This means poor traffic violation history will impact two annual insurance renewals.

Premiums

Every motor insurance buyer, who approaches a general insurer for any type of motor insurance, own damage or third-party or package covers, will be assessed for his traffic violation points. Accordingly, the traffic violation premium will be charged, said Irdai’s draft proposal.

Traffic violation premium will be payable by the registered owner of the vehicle, whether it’s an individual or an entity. Effectively, this means that the owner will take full responsibility for the traffic violations caused by the authorized vehicle driver.

Traffic violation premium will be charged only on the policy anniversary. If the policyholder has already paid traffic violation premium and approaches an insurer to buy an additional cover (OD in case of existing TP cover or vice-versa), she will not need to pay the violation premium all over again.

Traffic violation premium is a premium payable “as on date" and will not vary with the period of insurance cover. Hence, it is possible for the traffic violation premium to be the same for a long-term insurance buyer and annual insurance buyer if their vehicle types and violation history are similar, as per the draft proposal.

But should good drivers, who diligently follow traffic rules, expect discounts from insurers for good driving?

Sajja Praveen Chowdary, head, motor insurance, Policybazaar.com, an online marketplace for insurance, said that while there is no mandatory additional discounting prescribed for good drivers, it is expected that insurance companies will offer better discounts to people without any traffic offences once they correlate the data with claims. “This means that while offenders will pay a higher premium, over a period of time, people with good (traffic) behaviour with no offences against their names will end up getting lower prices eventually," Chowdary said.

So fasten your seat belts before you take out your car next.