Too Many Traffic fines? Your Vehicle Insurance Costs Might Rise

Delhi Lieutenant Governor VK Saxena has reached out to Union Finance Minister Nirmala Sitharaman, proposing that vehicle insurance premiums be linked to the number of traffic violations associated with the vehicles. He urged Ms. Sitharaman to consider implementing a tiered insurance premium system that accurately reflects drivers’ behavior. According to this proposal, vehicles with a history of infractions, such as speeding, reckless driving, or other traffic offenses, would incur higher premiums. This financial deterrent aims to encourage safer driving habits and promote responsible motoring in India.

In his letter, Mr. Saxena emphasized that such a system would align insurance costs with the actual risks posed by drivers and alleviate the financial strain on insurers caused by frequent claims. He pointed out that this financially driven approach, which is already in practice in the US and European nations, would foster responsible driving behavior, reduce accidents, save lives, and enhance the efficiency of managing insurance claims.

The letter referenced alarming data from the Road Transport and Highways Ministry, indicating a troubling increase in speeding and red-light violations, which significantly contribute to fatal accidents. A comprehensive study by the World Bank reinforced the link between multiple traffic violations and an increased risk of serious crashes, highlighting the need for urgent action.

India reported over 437,000 road accidents in 2022, leading to approximately 155,000 fatalities. Notably, speeding was responsible for nearly 70% of these incidents, with red-light violations also playing a significant role in fatal accidents.

The World Bank’s analysis showed that vehicles with numerous traffic violations face a 40% higher risk of being involved in fatal crashes compared to those with a clean record. In support of his proposal, the Lieutenant Governor pointed to Delhi’s accident statistics, which confirmed these findings. A 2023 report from the Delhi Traffic Police revealed that 60% of fatal road accidents involved vehicles that had previously incurred traffic fines, primarily for speeding and red-light violations. Vehicles with more than three traffic challans in a year showed a disproportionately high involvement in severe accidents.

The Lieutenant Governor requested that the Union Finance Minister consult with the Insurance Regulatory and Development Authority of India (IRDAI) to establish a framework for index-linked insurance premiums. He concluded the letter by stating that implementing this policy would be a significant step towards creating safer roads, saving lives, and ensuring a more sustainable transportation system for future generations.