Delhi LG proposes tiered insurance premiums linked to traffic violations to promote safer driving

Delhi LG proposes tiered insurance premiums linked to traffic violations to promote safer driving

Delhi's Lieutenant Governor VK Saxena has written to Union Finance Minister Nirmala Sitharaman, requesting her to establish a link between the amount of traffic violations that have been registered against a vehicle and its insurance rate.

He asked Sitharaman to consider his proposal for a tiered insurance pricing structure that directly represents driving behaviour. Higher premiums would apply to vehicles having a history of violations, including reckless driving, speeding, or other traffic offences. The LG stated that this financial penalty would promote a culture of responsible driving on Indian roads and encourage safer driving behaviors.

In his letter, Saxena emphasized how the implementation of such a system could reduce the financial burden that insurers face due to frequent claims, while also align insurance premiums with the actual risk that drivers face.

The LG stated that this financial deterrent-driven strategy, which is used in the US and Europe, would encourage careful driving, resulting in fewer accidents, saving lives, and guaranteeing more effective management of insurance claims.

The letter mentioned recent data from the Ministry of Road Transport and Highways, which revealed a concerning pattern of speeding and running red lights, both of which were major causes of fatal accidents. A comprehensive study conducted by the World Bank further emphasized the link between a high number of traffic violations and an increased risk for severe crashes, as well as the importance of taking immediate action.

About 1.55 lakh people lost their lives in traffic accidents in India in 2022, accounting for roughly 4.37 lakh incidents. Interestingly, speeding was responsible for about 70% of these accidents, and violations like running red lights significantly raised the number of fatal accidents.

An analysis of accident data by the World Bank found that vehicles with many traffic violations have a 40 per cent higher probability of being involved in fatal crashes compared to those with a clean driving record.

The LG used accident data from Delhi that corroborated these findings in order support his proposal. Over 60 percent of fatal accidents involved cars that had previously received fines for traffic violations, mostly for speeding and red-light jumping, according to a Delhi Traffic Police report from 2023. It was discovered that cars having more than three traffic violations in a single year were associated with severe accidents.

In order to establish a framework for index-linked insurance premiums, the Lieutenant Governor asked Union Finance Minister to engage with the Insurance Regulatory and Development Authority of India (IRDAI).

The letter stated that by putting this policy into effect, India can take a significant step towards creating safer roads, saving lives, and ensuring a more sustainable transportation system for generations to come.