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Topic: Traffic Violation Premium

Why in News?

• Recently, a working group set up by regulator Insurance Regulatory and Development Authority (IRDAI) has suggested introduction of 'Traffic Violation Premium' in addition to own damage and third party and other types of motor insurance premium.
• The group has recommended inserting a fifth section to motor insurance called "Traffic Violation Premium" in addition to motor own damage insurance, basic third party insurance, additional third party insurance and compulsory personal accident premium.

Key Highlights

• The report has recommended a system of calculating traffic violation point’s basis frequency and severity of different traffic offences.
• The amount of traffic violation premium will depend upon driving habits which will be determined by the number and types of challans, suggested the report of the working group on ‘Linkage of Insurance Premium with Traffic Violation’.
• Traffic violation premium shall be payable by the registered owner of the vehicle, whether an individual or an entity. Effectively this means that the owner will take full responsibility for the traffic violations caused by the authorized vehicle driver.
• As per the table of offences provided by the working group, drinking driving will attract the highest penalty of 100 points, while wrong parking will have 10 points penalty. The amount of premium will be linked to these penalty points.

Motor Insurance and Traffic Violation Premium

• The data of traffic challans will be stored by the National Informatics Centre (NIC) and shared with the Insurance Information Bureau of India (IIB) on a daily basis.
• Every motor insurance buyer, when he/she approaches any general insurer for any type of motor insurance, own damage or third party or package, will be assessed for his traffic violation points and motor insurance premium he/she needs to pay.
• In case of transfer of insurance of a vehicle after sale, the traffic violation premium would start from ground zero from the date of vehicle ownership transfer and build depending upon the traffic violations caused by vehicle after ownership transfer.
• The report said traffic violation premium will be charged only on the policy anniversary, once paid with any motor cover.

• Traffic violation premium is a premium payable ‘As On Date’ and does not vary with the period of insurance cover.

Pilot Project

• High Powered committee for Traffic Management in the National Capital Territory (NCT) of Delhi has recommended this to be run on a pilot basis in NCT of Delhi.
• The vehicles from other states, that cause traffic violation in NCT of Delhi, will have to pay traffic violation premium at the time of insuring their vehicle in their state, any time after causing traffic violation in NCT of Delhi.

Road Accidents Report

• According to Road Accidents Report, 2018 issued by Ministry of Road Transport, India witnessed 4.67 lakh road accidents that snuffed life out of 1.51 lakh citizens who were mostly in their productive age.
• India ranks first in the number of road accident deaths across the 199 countries reported in the World Road Statistics, 2018 followed by China and the US.

Outlook

• The government has already introduced heavy penalties on different types of traffic violations in the amended Motor Vehicles Act, 2019. In addition, the Government of India is also focusing on Intelligent Traffic Management System in the Metropolitan and smart cities.
• In September 2019, the IRDAI constituted the Working Group to examine the establishment of a system of Linking Motor Insurance Premium with Traffic Violations.