Good Or Bad, Your Driving Behaviour May Soon Affect Your Vehicle's Insurance Premium

After the increased traffic penalties have been put into effect under the new Motor Vehicle Act, another implication based on your driving behaviour might soon be on its way. This time, it is the insurance premium of your vehicle that will be directly affected by it.

A report by Livemint reveal that a nine-member working committee was formed recently by the Insurance Regulatory and Development Authority of India (IRDAI) to inspect the idea of linking vehicle insurance premiums with traffic violations.

A circular dated September 6 was also released for the cause. As per it, a vehicle¡¯s insurance premium in the country will be linked to the vehicle¡¯s driver¡¯s behaviour. This will work out as an added penalty for regular defaulters, while also rewarding those with good behaviour on the roads.

(Representative Image: BCCL)

A global concept

If and when the concept is implemented for Indian motorists, the move would be a mirror of how vehicle insurances are decided in other countries around the world. In the US, for instance, vehicle insurance premiums take into account the existing traffic rule violations committed by a driver. The premiums are then hiked or discounted accordingly.

The reward and penalty system also takes into account the type of violations listed for a driver. While not wearing a seat belt might lead to a slight increase in the premium, drunk driving can lead to a serious impact, almost doubling the premium in some cases. The important factor taken into account is the risk posed to the vehicle through such violations.

This would also mark a considerable distinction from the current practice of deciding insurance premiums in India. As of now, the vehicle model, make and year of manufacturing are mostly taken into account. Once the new system is put into place, the same would have to be framed around the driver of the vehicle instead of the vehicle itself.

(Representative Image: BCCL)

Ongoing preparation

To implement the new concept, Irdai will first have to come up with a set methodology of deciding these insurance premiums based on the traffic violations of the vehicle owner. For this, the committee has been given two months, post which it will first be implemented in Delhi on a trial basis.

The methodology will be based on data gained through the e-challan system that is already in place. While it is expected to have some inaccuracies at first, the new system is anticipated to prove beneficial for the Indian roads in the long run. As those displaying an erratic behaviour on the roads will be penalised with increased premiums and those with good driving ethics might get discounts on the same.

Recently, another impact of the new Motor Vehicle Act on vehicle insurances in the country was recorded. As per it, since the application of new and increased traffic penalties, insurance renewals have raised by as much as 500% in the first week. Read all about it here.