Traffic violations may soon be linked with motor insurance premium

More traffic violations will now lead to more penalty points against your name, leading to an increase in your motor insurance premium at the time of renewal.

Traffic violations may soon be linked with motor insurance premium

In a report published on 18 January 2021, a nine-member working committee of the Insurance Regulatory and Development Authority of India (IRDAI) recommended the insertion of a ‘traffic violation premium’. The committee comprised officials from the Delhi Traffic Police, IRDAI, the Insurance Information Bureau (IIB), and insurance companies. 

As per the recommendation, traffic violations should be linked with the vehicle insurance premium. Accordingly, the motor premium may escalate with an increase in the number of traffic violations. This is aimed at promoting better driving etiquette and road sense. A pilot run is planned in the National Capital Territory of Delhi.

Related: E-challans and vehicle document: Do you know these new motor vehicle rules?

How will it be implemented?

It is planned that the traffic violation points of the policy buyer will be assessed and the motor premium will be based on this assessment. Traffic violations will be considered for both third-party and own damage part of the motor insurance and will be attached to the section of insurance that is purchased. Therefore, any motor insurance policy, whether third-party or comprehensive, will incorporate traffic violations in the premium calculations. 

If you buy an additional cover, you will not have to pay the traffic violation premium if it was already charged at the time of purchase of the original policy. The traffic violation premium is paid as on date and does not depend on the policy coverage period.

As a driver, breaking the law will now not only lead to risking road safety but also leave a hole in your pocket. 

Related: Benefits of a long-term motor insurance policy

What are the components of a motor insurance premium at present?

The various components of a typical motor insurance policy include the premium for own damage, premium for third-party liability, personal accident cover for owner-driver, legal liability cover for employees (driver/cleaner/other), deductions for the no-claim bonus, zero depreciation add-on, cost of any other optional add-on, and GST on the total premium.

How is the traffic violation planned to be monitored for premium calculation?

Different points have been assigned to the various offences by the committee. For instance, drunken driving will attract 100 penalty points, while wrong parking will cost you 10 points. The data generated from traffic challans will be maintained by the National Informatics Centre (NIC). This data will be shared by the NIC daily with the IIB. The premium calculation will be linked with these penalty points accumulated.

What if the vehicle is sold?

In case of the sale of the vehicle, the traffic violation will be calculated from the date of vehicle ownership transfer. Only the violations caused after the date of transfer will be considered, which will be charged at the time of policy renewal/purchase.

Related: How abiding traffic rules can lower your car insurance premium?

What are the criticisms against this recommendation?

The recommendation indirectly shifts the onus of implementing the Motor Vehicles Act on insurance companies. D Varadarajan, a Supreme Court advocate, called the recommendation too ambitious and far-fetched because the responsibility of implementing the Motor Vehicles Act lies with the respective state governments. 

Varadarajan said that the recommendation is likely to fail legal scrutiny, as it aims to punish the traffic violator twice. The violator faces stiff penalty and even imprisonment for traffic violations. Increasing motor insurance premium will lead to a second punishment for the same offence. Motor vehicle law amendment: Know all fines for various traffic violations.


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