IRDAI Has Planned to Link Your Insurance Premium with Traffic Violations. How will it affect?

In the upcoming times, violation of traffic rules can be really expensive as the IRDAI (The Insurance Regulatory and Development Authority of India) along with the Government's co-ordination is planning to link traffic violations directly with your motor insurance premium.

IRDAI Has Planned to Link Your Insurance Premium with Traffic Violations. How will it affect?

On 6th September, the IRDAI has issued an order according to which the insurance providers have to undertake a pilot project in New Delhi to implement this escalation of insurance premiums.

The IRDAI has also set up a working group consisting of 9 members that will monitor or examine a particular system exhibiting the link of motor insurance premium and violations of traffic rules. The major intent behind this new change in rules is to reduce the number of accidents occurring on the roads daily and a change in the behavior of the drivers.

Terms of Reference For IRDAI Working Group

The major terms of reference for the working group appointed by IRDAI are mentioned below.

• The working group will provide a framework by which the traffic violations can be linked with motor insurance premium.
• The working group will study the international practices that are associated with this topic and will suggest the practices that are feasible in India.
• This group will suggest the modality for implementing a pilot project in New Delhi for the implementation of this new change in rule.
• The working group will carry out an evaluation of the current point system which is used for keeping track of traffic rules violations in different states of the country. The working group aims at creating a standard point system for tracking traffic rule violations all over India.
• The working group appointed by IRDAI will develop data fields which are needed to be implemented in violations of traffic rules and will be used as a rating factor in motor insurance.
• This group will also suggest methods by which access to the history of a traffic violation for each vehicle can be obtained and this data can be transferred from the authorities of enforcement to the IIBI (The Insurance Information Bureau of India) database.

Effects of Changes In Traffic Rules and Linking Insurance Premium with Traffic Rule Violation

With the implementation of the Motor Vehicles Amendment Act on 1st September 19, there have been many changes in laws related to the violation of traffic rules and regulations. In New Delhi, the drivers and the owners who were involved in violation of traffic rules were being issued e-challan by the Automated Traffic Enforcement. As per the new laws, if a vehicle is being driven on the roads without a license then a fine of Rs. 2000 would be imposed along with an imprisonment of 3 months. This will be the punishment for committing the offense for the first time. Later on, on the repetition of the offense, the amount of fine would be Rs. 4000 and an imprisonment of 3 months.

With these changes in-laws, people are quite stressed and have started taking traffic rules very seriously. A large number of vehicle owners and drivers are renewing their lapsed insurance policies and this has turned as a great business opportunity for the insurance providers.

Now, with the implementation of the rule of linking motor insurance premium with traffic rule violation; vehicle owners and drivers are going to be even more stressed. They are already paying high premiums and getting policies renewed or paying fines and the situation would be even worse with motor vehicle insurance premium being linked with a traffic rule violation. A small activity of rash driving or violating traffic rules can increase the premium of motor insurance and no one wants to bear additional expenses unnecessarily. This will be an expensive offense for the rash drivers who tend to ignore traffic rules. However, the number of accidents on Indian roads will decrease significantly with this change as it will reduce the number of rash drivers.

The working group appointed by IRDAI will submit its final report within two months and then the procedure for implementation is planned to begin. With this new traffic rule in the picture, let us hope to have an increased number of responsible drivers in the country.