The
Nut behind the Wheel:
Automobiles do not cause accidents, drivers
do. This is an elementary fact. I have yet to see a car run off by itself and
kill people. Yet in India we insure the car. Anyone can drive it. Let me repeat
that: an insurance company will pay for damages irrespective of who has driven
the car - young, old, infirm, trained, or untrained - so long as he holds a
valid licence. Does that sound strange?
True, no matter who is driving, a car can fail
temporarily because of bad brakes or terrible weather or bad road conditions.
In each of these cases is it not a fact that a more experienced driver stands a
better chance at bringing the car safely to a halt?
India is not known for great driving quality.
Licenses are issued to whoever has two legs and is not a chicken. Road
discipline is sorely lacking both in pedestrians and drivers with each blaming
the other and together blaming overcrowding. We all expect the policeman and
the government to regulate traffic and road use. While the policeman does his
best under the societal conditions we live in, the government is hesitant to
raise fines because it will only serve to increase corruption. It is a
universal truth that without strong deterrent action, societal behaviour cannot
be changed, yet we are unable to implement such mechanisms for want of will and
resources.
We
can Change:
Driving in India is a risky business:
pedestrians are either quick or dead and a driver is either quick or left
behind. Education and training have not been able to change our dare devil
approach to road safety norms. Financial penalties are either measly or just
not enforced. However, there is a solution that can have a deep impact on
driving habits and that is by creating a monetary disincentive for unsafe
driving using motor insurance.
Motor insurance premiums currently do cover
a combination of non-driving damage risks and driving-caused damage risks. India must get around to charging insurance
premiums by also including driver skills. Driving skill must get adequate
weightage. Why is driving skill so important? A tree can fall on a car, or it
can get stolen. These are non-driving related risks. It does make sense to
classify a car based on its intrinsic value and determine premium for such
non-driving risks. However a major portion of premium is towards “own damage”:
used to cover driver caused damage. Driving skill has a major impact on “own
damage” risk.
Most accidents are caused by inexperience,
either due to young age or the fact that the license owner, while not young,
may be new to driving. Our case is that insurance premiums must reflect this
reality. This will mean that young drivers will pay a higher premium. Young
drivers remain a major danger on the road, to themselves, their passengers and
other road users, with study after study showing that young people are far more
likely to be involved in a crash than older drivers. Inexperience, youthful
bravado, sheer recklessness and alcohol can all play a part in these accidents.
This kind of segregation will introduce caution, and in India this will be a
boon because as of now issuance of a driver’s license actually means that the
person can practice his driving on the road putting the lives of countless
pedestrians at risk. The corollary is that experienced and safer drivers will
pay less. Each insurance policy on the
car must be associated with a specifically identified driver or drivers. The
driving license can be the unique identifier. Since no-claim-bonuses will be
tagged to the named driver, each driver will be more careful in his driving
habits. Consistently unsafe drivers will end up paying extremely high premiums
or even become incapable of purchasing insurance, forcing change in their
habits. Just as companies share claims experience amongst them, they can share
driving characteristics amongst themselves to maintain authenticity of data.
Let
us Do it:
There is no reason to exclude commercial
vehicles from this philosophy. Why have we not moved to this regime is a
question that needs to be asked. Reasons are partly historical and partly
because insurance companies are loathe to change. We believe that giving an
insignificant discount if an applicant is part of an automobile association is
too cosmetic. Some companies ask for educational qualifications and offer some
discounts. These efforts are too small and do not address the real issue of incompetent
drivers. We believe that by moving to the new regime as suggested, motor
insurance companies will also be fulfilling their social responsibilities.
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