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Car Insurance Premium May Depend On How You Drive


Ever since the motor insurance act was introduced in 1998, insurance purchase has become mandatory when buying a new vehicle. Also, it has become mandatory to carry your vehicle insurance proof whenever you use your vehicle. The biggest piece of the insurance puzzle is the premium. How much premium you pay to motor insurance depended on the vehicle you possessed, the model and what kind of engine it had. Hence, people with more money could buy better cars and two-wheelers. They also invariably paid a higher car insurance premium.  However, a new government rule could change the entire equation.


What is the rule?

Until now, car insurance premiums were linked to vehicle type and features like engine capacity, model, etc. The government and the IRDAI have come together to link car insurance premiums with a person’s driving history.

The IRDA has initiated a nine-member panel to frame a model to link car insurance premiums with traffic violations. The panel has been given a 2-month deadline to finalize the model. The pilot project will be carried out in Delhi.

The project is part of the smart cities mission. The 9 member committee will also decide on a universal traffic violation point system best international practices to adopt among others.

The specifics:

So, what will be the criteria to determine who pays more and who pays less?

The more the violations, the more you pay as premium:

This criterion forms the core of the rule. Traffic violations can make your pockets feel uncomfortably lighter. The more traffic violations and challans you pay, the more you’ll pay as premium. Hence the way you drive can have a massive impact on how much you pay for your car insurance.

The more experience you have a driver, the lesser will be the premium:

 This criterion follows the logic that the more you drive, the more you know how to avoid accidents. Hence, the better driver you are, the less the premium you will have to pay.

A teenager who drives his new sports bike at 150kmph is more likely to crash than a 50-year-old who drives a 60 kmph Maruti Zen.

How would it work?

The Vahan Portal connect:

The Vahan portal, created in 2018 contains vehicle-related data like registration number, chassis, engine number, body/fuel type, etc. The website also includes details of traffic and safety violations captured through the e-challan system. These details will be shared with insurance companies.  The insurance companies will use this data to calculate premiums based on the traffic history of a person.

The insurance companies will segregate repeat offenders from safe drivers based on this data.  IRDAI will provide broad parameters to give discounts or enforce an increase in premiums.


Can this rule solve the problem?

Many experts have hailed it as a good move and some have even said it is a pathbreaking reform. As of now, it will help promote safe driving and reward safe drivers. People who haven’t had even a parking ticket in 20 years will feel rewarded.

This will be in line with global practices and could pave the way for further reforms.

The flip side could be that even the smallest violation could lead to an increased car insurance premium. With traffic violation fines already hitting a new high, this could further burn pockets.

The ultimate success of the project though will depend entirely on its implementation and how states and police respond to it.


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