Traffic offences may cost a ‘premium’

IRDAI forms working group to examine linking motor insurance premium with violations

The noose is set to tighten on traffic offenders with insurance regulator IRDAI on Friday forming a working group to examine and recommend linking of motor insurance premium with traffic violations.

The move comes close on the heels of steeper penalties for traffic offences, post amendments to the Motor Vehicles Act, taking effect. It is expected to improve compliance to rules and pave the way for more business for insurers. For those with more traffic violations, it would eventually mean a higher insurance premium.

Listing the terms of reference of the nine-member working group, the Insurance Regulatory and Development Authority of India (IRDAI) said it would recommend implementation of a framework and methodology to link insurance premium with traffic violations.

The group will study international practices and recommend best practices suitable to India. It will evaluate the current point system for traffic violations implemented by States and evolve a standard point system considering each violation.

Other terms of reference include developing data fields required to implement traffic violations as a rating factor in motor insurance and suggesting a system of access to traffic violation data history of each vehicle and transfer of data from enforcement authorities to the database of the Insurance Information Bureau of India (IIBI). The group will also suggest modalities for carrying out a pilot project immediately at the National Capital Territory of Delhi.

The setting up of the working group followed a request to the IRDAI from the High Powered Committee for Traffic Management in the NCT of Delhi, under the chairmanship of the Union Home Secretary, to examine the issue of linking insurance premium with traffic violations.

Subsequently, at a meeting under the chairmanship of the Special Commissioner of Police Traffic, Delhi on Integration of insurance and traffic prosecution data, it was decided that a Working Group will be formed to take the idea forward.

Insurance companies have to undertake the pilot project in NCT to implement the premium escalation formula, IRDAI member (non-life) T.L. Alamelu said in the order constituting the working group. The working group has been given eight weeks’ time to submit the report.

The group will comprise senior executives of a few private and public sector general insurance companies, officials of IRDAI, IIBI and the Delhi Traffic Police.

Sources in insurance firms said the automated traffic enforcement and the system of e-challans in place in many States provided a foundation for moving towards a system of linking premium with the violations. Though it might take some time, such a link seems inevitable and would also push more vehicle owners to opt for the mandatory motor third party insurance cover.

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