Drivers with a blemished record will face higher charges on their vehicle insurance policies in Shanghai as the local municipality attempts to improve the traffic situation.

For drivers, who are involved in drunken driving, speeding, overloading or running red lights, the premium charge on vehicle policies can be raised by up to 25 percent, said Jiao Yang, a spokeswoman of the Shanghai government Tuesday.

"Shanghai is the first city in the mainland to adopt the risk-measured floating premium mechanism," Jiao said.

The local municipality said in a statement that "a key reform in the new vehicle insurance regulations is the diversification of premium requirements for different policy buyers based on their driving record."

Local insurers customarily sell vehicle policies with a uniform premium rate.

Meanwhile, the premium requirement for drivers with sound driving records is expected to be lowered by 40 percent at most, said Jiao.

The prerequisite for the preferential rate is that the driver should have no traffic rule violations in the past year and no insurance claims history.

The local government undertook this measure to ease the worsening traffic situation in the city.

The local traffic administration department dealt with 17 million violations of traffic rules and 54,196 traffic accidents last year, from which 1,406 people died and resulted in losses of 400 million yuan (US$48.19 million).

Property insurers welcome the local government's efforts. They have been complaining about the increasing compensations claims due to the bulging number of new drivers and worsening traffic situation.

"The diversified premium requirement for different vehicle policy buyers is more market-oriented and can help insurers ward off operation risks," said Bi Xin, deputy general manager of PICC Property and Casualty Co Shanghai Branch, which is the largest local property insurer.

Shanghai issued about 78,000 auto plates last year to individuals and private business owners, an increase of 20.7 percent from a year earlier.

Before last year, all of China's property insurers sold vehicle policies under a rigid premium rates set by the China Insurance Regulatory Commission and the prices of vehicle insurance products were the same across different insurers.

(eastday.com April 21, 2004)