Australia’s optional vehicle property damage insurance system is “plainly unfair” to insured motorists, a Brotherhood of St Laurence report has found.
The report revealed that responsible drivers are footing an additional $45 on their annual insurance bill due to the tens of thousands of crashes caused by uninsured drivers each year.
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“The Pranged: The Real Cost of Optional Vehicle Insurance in Australia” report estimated that insured drivers pay a total of $1.3 billion in additional fees each year to cover the risk of accidents with some 2.3 million uninsured drivers, who cause roughly 114,000 accidents nationwide each year, Herald Sun reported.
The report said higher premiums were due to many motorists opting to buy expensive comprehensive policies to better protect themselves; and the unrecoverable losses insurers pass on to policyholders for repairs that uninsured drivers were unable to pay.
Third-party policies with an uninsured motorist extension, meanwhile, provide policyholders some limited protection when the motorist who damages their vehicle has no insurance and is unable to pay for repairs.
However, adopting a compulsory scheme similar to the UK’s is not the way to solve the country’s problem with “unfair” vehicle property damage insurance though, said Tony Robinson, report author and former Victorian consumer affairs minister, Herald Sun reported.
“Overseas experience shows forcing people on low incomes to pay more doesn’t work,” he said. “Mandatory schemes still record significant percentages of people who don’t pay for compulsory cover. What if they are dependent on cars for work? You can’t take cars off people.”
The report recommended instead that motorists be educated about insurance cover and that the government’s stamp duty be reviewed to make policies more affordable. It also suggested improved and consistent uninsured motorist extension cover in basic third-party property policies.
Robinson said a cause for uninsurance is the incorrect assumption that car registration payment, which includes compulsory third-party personal injury insurance, also covers property damage, Herald Sun reported.
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