IRDAI looks to hike motor insurance premiums for traffic violations

In a move that could drive away vehicle buyers, the Insurance Regulatory and Development Authority of India (IRDAI) is looking at the possibility of linking of motor insurance with traffic violations – the higher the premium the more such traffic violations involving the vehicle.

The insurance regulator has set up a nine-member working group to examine a system of linking motor insurance premiums with traffic violations. The working group, headed by Anurag Rastogi, chief actuary and chief underwriting officer of HDFC ERGO, has been asked to submit its report in two months.
The terms of reference of the Working Group are:
  • Recommend implementation framework and methodology to link insurance premium with traffic violations;
  • Study international practices on the subject and recommend best practices suitable to lndia;
  • Evaluate the current point system for traffic violations implemented by states and evolve standard point system considering each traffic violations;
  • Develop data fields required to implement traffic violations as rating factor in motor insurance;
  • Suggest system of access to traffic violation history data of each vehicle and transfer of data from enforcement authorities to llBl database; and
  • Suggest modalities for carrying out an immediate pilot project at NCT of Delhi.
IRDAI argues that linking of insurance premium to traffic violations could act as a deterrent for drivers and would help reduce road accidents and change driver behaviour. Insurance companies have been tasked to run pilot projects in Delhi to implement the premium escalation formula, according to an order issued by IRDAI.
The regulator says that linking motor insurance premium with traffic violations will be a remedy for bad driving. 
Already, traffic violations attract higher penalties from 1 September as per the recent amendments to the Motor Vehicle Act.