Out of control: uninsured drivers are pushing up premium costs
The road to ruin Driving without appropriate cover can turn even a minor crash into a major headache for all involved By Andy Swales
FOR MANY PEOPLE, GENERAL insurance is bought begrudgingly, forking out hard-earned cash for a product we hope never to call upon. But even if our homes somehow remain blissfully unflooded and unburgled, chances are all of us will make a claim at some point – most likely on the road. Driving without holding at least thirdparty property insurance (TPPI) is a serious gamble, but according to some observers it is a major and growing problem. Research published late last year by poverty campaign group the Brotherhood of St Laurence estimated (using vehicle registration and the prudential regulator’s vehicle insurance data) that 11.9% of vehicles in Australia lacked insurance coverage, equivalent to 2.3 million drivers. By its calculations, this meant insured drivers paid about $1.3 billion more for their coverage than they would if motor vehicle insurance were universal. As QBE says, accidents involving uninsured drivers can hit insurers’ bottom lines, and in turn affect policyholders’ premiums. “Attempting to recover costs from an uninsured third party that has damaged the property of an insured can be a lengthy process for the insurer involved, and doesn’t always result in the recovery of funds,” a spokesman tells Insurance News. 52
“Once the claim is processed and approved, the insured’s costs are paid by their insurer. However, these funds may not always be recoverable from the at-fault third party. “For example, QBE follows the financial hardship guidelines and may allow third parties to delay payment, pay via instalments or, in extreme hardship cases, have their debt waived. This means in some circumstances, costs are completely absorbed by the insurer.” The words “extreme hardship” point to one obvious reason why many drivers hit the road without property insurance. Brotherhood of St Laurence Principal Research Fellow for Work and Economic Security Dina Bowman has conducted a separate study on the way financial hardship influences decisions around risk and insurance. For her research subjects in low-income areas of Melbourne, small yet high-impact risk is “an everyday thing”, and she tells Insurance News motor cover can fall well down the list of priorities. “Will your car get to where you want to go, will $5 of petrol last, will the tyres last, will it break down? All these kind of risks – what can you put off and what do you absolutely have to pay? Often, insurance is too distant, and so they are [instead] dealing with the immediate.” insuranceNEWS
October/November 2018
Her research report argues poorer households are having more “financial and emotional” risk piled upon them due to “rising income inequality, less secure employment and more conditional access to welfare payments”. She likens it to a juggling act, in which risk mitigation may mean “saving on food costs by a parent quietly forgoing dinner” to cover the cost of “a lost school tie or… a new car battery”. Dr Bowman also notes: “The trend in private insurance towards a more granular rating of each individual’s risk is rapidly gaining pace. In a social and economic context where fewer people will be treated as ‘average risk’, far more Australians will soon be unable to afford insurance or will be assessed as uninsurable.” Taxicare, a licensed mutual serving the taxi industry, has issued a call for action on the “enormous problem” of uninsured drivers. General Manager Australia Don Storace has written to government figures urging an end to insurance stamp duties to reduce premiums (a common rallying cry industry-wide), plus a more radical overhaul: steps to make TPPI compulsory, in line with overseas markets such as the UK. “Millions of dollars are lost a year in unclaimed or unrecovered damages from
