IRDAI working group suggests introduction of Traffic Violation Premium

A working group set up by regulator -- Insurance Regulatory and Development Authority of India (IRDAI) has suggested introduction of 'Traffic Violation Premium' in addition to own damage and third party and other types of motor insurance premium. The group has recommended 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. It said ‘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’.

The report has recommended a system of calculating traffic violation points basis frequency and severity of different traffic offences. The amount of traffic violation premium will depend upon driving habits which will be determined by the number and types of challans, suggested the report of the working group on 'Linkage of Insurance Premium with Traffic Violation'. It said ‘Traffic violation premium shall be payable by the registered owner of the vehicle, whether an individual or an entity. Effectively this means that the owner will take full responsibility for the traffic violations caused by the authorized vehicle driver’. As per the table of offences provided by the working group, drinking driving will attract the highest penalty of 100 points, while wrong parking will have 10 points penalty. The amount of premium will be linked to these penalty points.

The data of traffic challans will be stored by the National Informatics Centre (NIC) and shared with the Insurance Information Bureau of India (IIB) on a daily basis. it said ‘Every motor insurance buyer, when he/she approaches any general insurer for any type of motor insurance, Own damage or Third party or package, will be assessed for his traffic violation points and traffic violation premium he/she needs to pay’. The report said traffic violation premium will follow the fortune of 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 sale, the traffic violation premium would start from ground zero from the date of vehicle ownership transfer and build depending upon the traffic violations caused by vehicle after ownership transfer. The report said traffic violation premium will be charged only on the policy anniversary, once paid with any motor cover. Traffic violation premium is a premium payable ‘As On Date’ and does not vary with the period of insurance cover. Hence it is possible for the traffic violation premium to be the same for a long term insurance buyer and annual insurance buyer, if their vehicle types and violation history are similar.