Linking Motor Insurance Premiums with Traffic Violations: A Game-Changer for Drivers
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What is Traffic Violation Premium?
The proposed framework suggests adding a fifth component to motor insurance policies alongside:
- Own-Damage (OD) Insurance
- Basic Third-Party (TP) Insurance
- Additional Third-Party Insurance
- Compulsory Personal Accident Premium
The traffic violation premium will penalize drivers with poor traffic behavior by increasing their insurance costs, while rewarding those with a clean driving record.
Data Collection and Evaluation
The Insurance Information Bureau of India (IIB) will play a central role in this system by:
- Collaborating with state traffic police and the National Informatics Centre to gather real-time traffic violation data.
- Maintaining historical violation data for all vehicles.
Only traffic violations committed in the last two years will influence the premium amount. This ensures that any poor driving history will affect up to two annual renewals of the motor insurance policy.
How Will It Work?
- Every motor insurance buyer will be assessed for traffic violation points based on their recent driving history.
- The registered owner of the vehicle, whether an individual or an entity, will bear the premium cost.
- Traffic violation premiums will be applied annually, regardless of whether the policy is short-term or long-term.
- Once paid, the violation premium will not be recalculated for additional coverages purchased during the policy term.
Implications for Drivers
This policy aims to instill safer driving habits. As Naval Goel, CEO of PolicyX.com, stated, “Safe drivers will get better rates, while aggressive drivers will pay more. This approach enhances risk-based pricing and encourages responsible driving."
Will Good Drivers Get Discounts?
While the proposal doesn’t mandate discounts for drivers with clean records, Sajja Praveen Chowdary of Policybazaar.com noted that insurers are likely to offer lower premiums to good drivers over time. Insurers could leverage driving data to offer competitive rates to those with no violations, making good driving behavior financially rewarding.
A Step Towards Safer Roads
This move not only incentivizes compliance with traffic rules but also shifts accountability to vehicle owners for violations caused by authorized drivers. Over time, this could lead to reduced traffic offenses and improved road safety.