- How you drive and how many accidents you are involved in could soon be a factor for insurance companies to decide the premium you need to pay to insure your vehicle
- This is the first time when such an initiative has been taken
- At present, the insurance premium is linked to the type of vehicle and engine capacity
NEW DELHI: How you drive and how many accidents you are involved in could soon be a factor for insurance companies to decide the premium you need to pay to insure your vehicle.
Insurance Regulatory and Development Authority (IRDA), the insurance regulator, has set up a nine-member panel to recommend the implementation framework and the methodology to link insurance premiums with traffic violations. It has been asked to submit its report in two months.
The committee was set up following a recommendation from a high powered committee under the home secretary, which looked into traffic management in Delhi. Though the IRDA panel has been asked to come out with the modalities for carrying out “an immediate pilot project”, sources said this template could be used for other cities and states in the near future.
This is the first time when such an initiative has been taken, though for years there have been discussions on how to tame risky drivers by linking their vehicle insurance premiums. Some western countries have done it successfully. It has also been established across the globe that drivers’ behaviour is responsible for more than 70% of accidents.
According to the panel’s terms of reference, it has been asked to “evaluate the current point system for traffic violations implemented by states and evolve standard point system considering each traffic violations”. It will develop data fields required to implement traffic violations as a rating factor in motor insurance. The panel will also suggest a system of access to traffic violation history data of each vehicle and transfer this from enforcement authorities to the database of Insurance Information Bureau of India (IIBI).
At present, the insurance premium is linked to the type of vehicle and engine capacity. Vehicle owners get some discount if they have not made any claim during the last year.
According to the 2017-18 annual report of IRDA, out of the total Rs 1.56 lakh crore non-life insurance premium collected, the share of motor insurance was Rs 59,250 crore (30%).
Government sources said insurance companies would have to play a major role to reduce road deaths and this becomes all the more important for their business since the government has increased the compensation by the insurance company to Rs 10 lakh for death and Rs 5 lakh for serious injuries. “If their initiatives reduce the number of accidents and deaths, their total compensation outgo will also fall. So, it makes perfect sense for their future business,” said a transport ministry official.
Courtesy: Economic Times