A premium for good road behaviour?

Imagine a CIBIL score for motor insurance. Instead of your debt repayment records, you’ll be rated on your road behaviour – sticking to speed norms or parking in designated zones, for instance. On paper, that sounds reasonable. In practice, that might do more harm than good to millions of Indian private vehicle owners, and end up favouring the insurers in an unequal game. It could also compound the penalties a vehicle owner has to suffer, while dragging the insurer to the traffic policy turf. With many of the violations such as skipping traffic lights not even leading to any claims, the proposed rules may not stand the scrutiny of fairness and business principles.Moreover, it follows the “fortune of the vehicle” rather than that of the driver, with insurance in India linked to vehicles rather than individuals. Meaning, an erring driver may go scot-free, while the vehicle’s owner will have to bear the brunt of higher insurance premium. Several stakeholders believe that the law has come before its time.Delhi NCT (National Capital Territory) will be the testing ground for the ‘Traffic Violation Premium’ once the draft guidelines are finalized. IRDAI would partner Delhi Traffic Police to implement the new mechanism. It would harness thousands of CCTV speed detector cameras that automate challan generation through repositories maintained by National Informatics Centre (NIC) and Regional Transport Office (RTO).“An apparent legal obstacle would be double jeopardy, as the traffic violator would be punished twice over for the same wrong,” says Sukun Chandele, Partner, Mind Legal. “Also, situations may arise where the person fined has appealed in Court against such a fine and meanwhile the renewal date comes up. Would the premium escalation be on hold until the decision on appeal?”The Delhi NCT pilot is expected to run for a year following which states can implement the rule with their own caveats. “(This rule) will float over both Own Damage and Third-Party sections of Motor insurance and can be attached to any section of motor insurance cover being purchased,” according to a report published by IRDAI in January.The proposal is based on recommendations by a nine-member IRDA-appointed committee composed of officials from the Delhi Traffic Police, IRDAI, Insurance Information Bureau (IIB) and insurance companies. “Only 58% of the vehicles in India are insured. The reason for choosing Delhi as the testing ground is also that data suggests most of the vehicles in the capital city come under the ambit of motor insurance,” said Subrata Mondal, EVP (Underwriting), at IFFCO Tokio GI.ET spoke with insurance, legal and road traffic experts to understand the rationale and benefits behind introduction of the scheme. They pointed out that India’s diverse diaspora, cultural complexities and non-uniform traffic and tech infrastructure could render such a mechanism challenging to implement.“In case of players like Zoom Cars, it hits at the root of the business model in a very unfair manner. On the one hand, they would have no advantage of the new system because they can still only ask for the driver’s license for verification. They will not have access to traffic violations made by the customer for screening customers,” said Mind Legal’s Chandele.The US, Canada, the UK, France and Australia have similar systems and algorithms in place to link motor premiums, based on traffic violation status. However, this is based on a tech infrastructure that binds an integrated database with social security and driving licenses of vehicle owners.In the absence of an established vehicle registration database that links traffic violations with individual drivers in India, experts have also raised questions whether the regulator is being hasty. “There are two main concerns. One is data formatting mismatches between different states and how this will be corrected, and the second is on privacy of user data. How will the regulator ensure that access to such a database will not be misused by private insurers to bundle and cross-sell products?” asked Srinath Sridhar, an insurance industry expert and a visiting fellow at ORF.“What happens if a driver from Ludhiana gets penalized in New Delhi?” Sridhar added. According to Sajja Praveen Chowdary, motor business head, Policybazaar, the new rule can be good for the country in a longer time frame.“One of the reasons the regulator wants to start with Delhi NCT is that it has adequate infrastructure in place to run a pilot,” says Chowdary.As per the IRDAI report, in practice, every motor insurance buyer will be assessed for traffic violation points, which will determine the premium. It will be based on a grade-based scoring system where severe offences will lead to higher premium slabs.“The data of challans issued by Delhi Traffic Police is stored by National Informatics Center (NIC). Data from NIC would be shared with IIB at the end of every day,” said the IRDAI report.Ravi Bhatia, president at automotive business intelligence firm Jato Dynamics, called this a move in the right direction. “The system capability is in place to track and trace ownership. Also, we have seen that the infrastructure is in place to capture traffic violations in a centralized database,” he said. “Given our road safety record, this is a step in the right direction to inculcate responsible behavior.”
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