Link Traffic Offences With Insurance Premium: IRDAI Committee

Link Traffic Offences With Insurance Premium: IRDAI Committee

Chennai:  Fined for parking in the no-parking area a couple of times? Be ready to pay an increased insurance premium for the traffic violation.
But don’t ask how parking in no-parking area would increase the accident rate and the claims outgo for the insurers.
A Working Group set up by the Insurance Regulatory and Development Authority of India (IRDAI) submitted its report on Monday, recommending linking of motor insurance premium to various traffic violations that ranges from parking in no-parking areas to drunken driving.
As per the report, the motor insurance premium will be increased if the vehicle had been charged by traffic police for violating the traffic laws.
The report recommends a system of calculating Traffic Violation Points basis frequency and severity of different traffic offences.
The Insurance Information Bureau of India (IIB) will coordinate with various states’ Traffic Police and the National Informatics Centre to capture the traffic violation data, calculate violation points of each violating vehicle and make this information available to all general insurers through information technology (IT) system integration with them.
The pilot of the project is planned to be implemented in the National Capital Territory of Delhi.
According to the report, the traffic violation premium may be fixed by the IRDAI and reviewed every three years or earlier as deemed appropriate.
The IRDAI Working Group is a follow-up of a High Powered Committee for Traffic Management in the National Capital Territory of Delhi, under the chairmanship of Union Home Secretary, requesting the insurance regulator to examine the issue of linking insurance premium to traffic violations.
However, the Indian insurance regulator should follow its motto of protecting the policyholder’s interest by policing the insurers instead of turning them into a “traffic cop” to beef up their coffers with “traffic violation premiums”, said experts in legal, insurance and consumer protection.
“On face of it, the recommendations seem to be good. Practically the result has to be seen – whether it results in increasing the revenue of the insurers or reduction in accidents,” Saroja S., Director, Citizen Consumer and Civic Action Group (CAG) told IANS.
However, Saroja noted that the committee did not have a single representative from the policyholders side.
“IRDAI should curb the huge discounting of the premium – up to 80 per cent – charged for new vehicles instead of looking at other revenue avenues for non-life insurers,” a senior official of the general insurance industry, speaking on the condition of anonymity, told IANS.
He said the traffic violation premium will add to the top and bottom line of the insurers as the motor insurance premium is arrived at taking into account the entire claims experience.
While the committee has enthusiastically recommended charging traffic violation premium, it did not give any valid reason for offering a discount on premium for not earning any traffic violation points.
D. Varadarajan, a Supreme Court advocate specialising in company/competition/insurance laws, told IANS that “the Working Group’s recommendations of linking motor insurance premium with traffic violations is far-fetched, highly ambitious and is an attempt to shift the burden of implementation of the Motor Vehicles Act indirectly on the insurers, whereas the strict enforcement of the law lies on the shoulders of the state governments concerned”.
Already, under the extensively amended Motor Vehicles Act, stiff penalties and fines, including imprisonment of errant drivers for various traffic violations are put in place, he said.
“The legality of the recommendation to charge ‘Traffic Violation Premium’ if implemented, would not withstand legal scrutiny, as it would amount to punishing a person twice for the same offence, one by way of traffic challan and other by charging traffic violation premium,” Varadarajan added.
Citing the Working Group’s report, he said it is clear that this system is not uniform among the select countries as discussed therein. For instance, it is noticed that Japan does not adopt this practice.
Varadarajan and Saroja were of the view that there should be concerted efforts for strict implementation of the Motor Vehicles Act.
According to Varadarajan, if the issue of uninsured vehicles is tackled on a war footing, most of the problems would be solved.
“This coupled with the extant practice of loading of premium or allowing no claim bonus, as the case may be, would suffice and let the insurers be not saddled with this additional burden. It is not clear as to whether the Working Group’s recommendations are based on the views of the cross-section of the insurers, vehicle owners, especially the commercial vehicle segment, etc., who already have their tales of woes,” Varadarajan said.
 

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