Linking vehicular insurance premiums to driving behaviour is a good move

A dipstick measure of how seriously the government is taking the issue of road accidents and poor driving behaviour—apart from the heavy fines under the amended Motor Vehicles Act—is the fact that it is mulling over linking premiums for vehicular insurance to the individual’s history of traffic violations. Indeed, the compounded penalty could induce motorists to exhibit safer driving behaviour. On September 6 , IRDAI notified the constitution of a working group to recommend the implementation framework and methodology for a potential premium-driving behaviour regime. The national capital territory (NCT) might see a pilot launch of the new insurance policy as early as November.

At present, premiums for automobile insurance in India are dependent on the make and model, as opposed to the global practice of basing them on the driving practices of the insurance beneficiary. However, the new system is expected to follow the globally-accepted points-based model, wherein the severity of traffic violations affects the premium. Failure to wear a seatbelt, since it doesn’t expose the vehicle to risk of accident, would lead to a much smaller rise in insurance premium as compared to, say, having a history of drunk driving. The data for customising insurance premiums is expected to be sourced from Automated Traffic Enforcement systems and e-challans. This model would, equally, give discounts on premiums to motorists with exemplary records of driving behaviour. For better collation of data, perhaps the use telematics devices, or black boxes, within vehicles could be considered. This system of pay-the-way-you-drive insurance—based on technology that records information like vehicle speed, location, driving frequency, and other performance indicators like how hard the brakes are applied, how rapid the acceleration level is, and how sharp of a corner is taken—has taken off in developed nations. India must take that route, too.