Traffic Violations Could Hike Your Insurance Premium

Jumping a red light next time could lead to an increase in your motor insurance premium if a working group committee's recommendations are accepted by the Insurance Regulatory and Development Authority of India (IRDAI).

The committee was set up by IRDAI to examine and recommend linking of motor insurance with traffic violations.

"The working group recommends inserting a fifth section to motor insurance called “Traffic Violation Premium” in addition to motor own damage insurance, basic third party insurance, additional third party insurance, and compulsory personal accident premium. This section will float over both own damage and third party sections of motor insurance and can be attached to any section of motor insurance cover being purchased, chiefly, own damage or third party insurance.," said the exposure draft issued by IRDAI.

The proposal stated that the insurance Information Bureau of India (IIB) will make the traffic violation data for each vehicle available to general insurers. It would do so by co-ordinatiing with different states' traffic police and National Informatics Centre to collect violation data and will then assign violation points to each vehicle that will be shared with general insurers. This traffic violation point would be used while deciding the premium.

According to the draft proposal, drunk driving will have 100 penalty points, disobeying police would have 90 points while wrong parking will have 10 points penalty.

IIB will maintain the historical traffic violation data of all vehicles, however, the violation points of only the past two years of rolling traffic violations, from the date of insurance proposal will matter for traffic violation premium. This means a poor traffic violation history will impact two annual insurance renewals, the proposal said.

It also added that traffic violation premium will follow the fortune of the vehicle, rather than the owner. This means when a new vehicle is bought, it will start with a clean traffic violation history and its owner, when buying motor insurance, will not need to pay any traffic violation premium, even if he has a past traffic violation history, either as a driver of a vehicle owned by another person or his own vehicle of similar or a different category.

In case of transfer of insurance of a vehicle after the sale, the traffic violation premium shall start from ground zero from the date of vehicle ownership transfer and build depending upon the traffic violations caused by the vehicle after ownership transfer.

For now, the insurance regulator has invited stakeholders' inputs on the recommendations till February 1, 2021.