With the new Motor Vehicles (Amendment) Act, 2019, that came into effect on 9 August, you won’t just get away by paying a fine when you violate a traffic rule, it will also have a bearing on your motor insurance premium.

The IRDAI (Insurance Regulatory and Development Authority of India) formed a nine-member working committee to examine linking premiums with traffic violations. The IRDAI circular, dated 6 September, came after the government emphasized that traffic violation history should be considered as a parameter to fix motor insurance premiums. Usually, up until now, the premiums were, typically, dependent on the car’s make, model and variant.

“The move will discourage traffic rule violators and reward good driving behaviour. It will help India adopt global practices, leading to further innovations in the space,” said Indraneel Chatterjee, co-founder and principal officer, RenewBuy.com, a digital insurance company.

The IRDAI committee has been given two months to recommend the implementation framework and methodology, after which a pilot project will be undertaken in Delhi to implement the premium formula.

How the pricing will get implemented

The IRDAI committee is expected to come up with resolutions in terms of how premium prices will be charged across traffic violations.

In the US, not fastening the seat belt would increase the premium of $1,500-1,800 by about $60, but if the driver is found driving under the influence of alcohol, then the premiums can go up by two times, he said. “If someone is a repeat offender for driving under the influence of alcohol, in all likelihood, the number of claims will be higher,” added Tarun Mathur, chief business officer, general insurance, Policybazaar.com.

Motorists driving etiquette

This new rule of premiums might get uncertain and will reward careful drivers. In India, insurance premiums are linked to the vehicle and not the driver, which is not the right way to decide the price, said, experts. “This will benefit policyholders who are safe drivers because they will most likely get a discount on premiums,” Mathur said.

We have to keep in mind that once this new rule comes into effect, even the smallest of violations could affect the premiums. “Given that traffic violations will have an implication on the premium, policyholders will have to be cautious,” said Chatterjee.

Insurers said IRDAI will prescribe broad parameters for discounts or increase in premiums

“We would then be able to segregate good drivers from regular violators. We can say it like, the day I start exercising, I also look at what I eat. Similarly, once people know what price they’ll have to pay a hefty penalty for violating traffic rules, they’ll automatically become more careful,” said Gurneesh Khurana, country head, motor business, Bajaj Allianz General Insurance

The committee is also looking into defining different scenarios and may base the premium on the actual driver’s driving patterns, he said.

It’s high time for motorists to get careful about their driving pattern.

(With input from agencies)