October 1, 2022

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How additional motor insurance premium may be calculated

You might have to pay more premium for a motor insurance policy if you violate any traffic rules henceforth. The draft proposal report submitted to Insurance Regulatory and Development Authority of India (Irdai) on 18 January by working group committee has recommended traffic violation premium.

This additional traffic violation premium section will float over both Own Damage (OD) and Third-Party (TP) sections of motor insurance policy.

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As per the draft proposal, “IRDAI will need to mandate uniform Traffic Violation Premium across insurers that are impervious to competitive pressures and may review the adequacy and effectiveness of this premium every three years, or earlier as it so deems fit.”

Sajja Praveen Chowdary, head, motor insurance, Policybazaar.com, said, “It is proposed to add a new section under motor premium for traffic violations. Every violation has points and the points you have got in the last 24 months will be taken into consideration. And on basis of the points, the premium can go up to an extra of 1,500 over and above what you are paying today.”

As per the draft proposal, all traffic offences have been categorized into three main categories, namely:

* Offences that cause traffic hazard

* Offences that are compliance-related

* Offences that are pollution-related

Currently, traffic violations that cause traffic hazard have been identified for linkage with the motor insurance premium.

Details of how your premium may be calculated:

A point system has been designed and recommended for adoption by the IRDAI’s working group. This system takes into account both the relative severity of traffic offence as well as repetition. Therefore, a repeater of a less severe traffic offence can collect as many points as a one-time serious traffic offender.

For each traffic violation, a vehicle will accumulate violation points as described in the table “Traffic Violation Points” below.

Offence code Offence cluster Violation points
THZ 1 Drunk driving 100
THZ 2  Dangerous driving 90
THZ 3  Disobeying police  90
THZ 4 Over speeding/racing 80
THZ 5 Driving W/O license/insurance  70
THZ 6 Wrong-lane driving  60
THZ 7 Hazardous goods carriage 50
THZ 8 Traffic signs 50
THZ 9 Overloading  40
THZ 10 Safety measures  30
THZ 11 Vehicle modifications 20
THZ 12 Wrong parking  10

Source: IRDAI

Violation points have been assigned on the basis of perceived severity of the traffic offence. Repeat offences get normal points multiplied by the repeat frequency. For instance, if a violation of traffic signal attracts 50 violation points, second such offence, any time in the past, will attract 100 points; third such offence any time in the past will attract 150 points, and so on. Hence if a vehicle owner approaches an insurer for motor insurance and has violated traffic signal thrice in the last two years, his/her violation points for traffic violation premium shall be 300 (50 for a first offence, 100 for second offence and 150 for the third offence).

As per the draft proposal, a new vehicle (either brand new or under a new owner) will start its traffic violation points from a clean slate and accumulate points for the vehicle owner—combination for a rolling period of two years after which, with every passing day, the past violation history older than two rolling years will get wiped out.

The additional premium you may have to pay:

It is recommended, as per the draft proposal, that traffic violation premium be fixed by IRDAI and reviewed every three years or earlier as deemed appropriate. Following traffic violation premiums have been recommended:

Total violation points (THZ)  Two- and three-wheelers (Rs)  Four-wheeler and private and commercial (Rs) 
Not exceeding 20  NA NA
Exceeding 20, up to 40  100 300
Exceeding 40, up to 60  150 400
Exceeding 60, up to 80  200 600
Exceeding 80, up to 100  350 800
Exceeding 100, up to 300  500 1,000
Exceeding 300  750 1,500

Source: IRDAI

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