Report says car insurance costs don’t add up

Anti-poverty group urges rethink of vehicle insurance to increase fairness.

Car insurance costs don’t add up

The owners of 2.3 million uninsured vehicles in Australia risk the cost of accidents that many of them can’t afford, while insured motorists pay a total of $1.3 billion more for their coverage than they would if all were insured, according to a new Brotherhood of St Laurence report.

The report, titled Pranged: the real cost of optional vehicle insurance in Australia, says the main reason motorists give for being uninsured is the cost, and that Australians on low incomes are less likely to insure their vehicles.

“We need to rethink Australian motor insurance,” said Tony Robinson, the Financial Inclusion Senior Manager of the Brotherhood, a national anti-poverty group.

“However, mandatory insurance is not the answer as it will punish poor people. This new report aims to spur public discussion on how to improve the current system, and sets out some steps towards this.

“Many can’t afford to insure their vehicles yet are dependent on them for daily living, particularly in outer suburban and regional areas where housing costs less but public transport is scarce or non-existent. Yet accidents can incur repair costs that are financially crippling – for insured cars the average insurance claim is $3000.”

The report says there is also confusion about what is included in the compulsory third party insurance paid with car registration.

Some mistakenly think that it includes damage to other cars or property.

However, state governments mandate compulsory third party insurance only for personal injury or death, while insuring for damage to cars or other property is left up to the owner - either comprehensive insurance or cheaper third party property policies.

It says motorists who take out insurance pay more in order to cover the risk of loss arising from accidents caused by vehicle owners who are uninsured, whether that is through choice or an inability to afford insurance. Insured motorists pay $1.3 billion more for their coverage than they would if vehicle insurance were universal.

The report outlines the steps towards a better system.

  • Insurers run an awareness campaign about the need to buy property cover separately as it’s not covered by compulsory third party insurance. This would encourage uninsured drivers who can afford coverage to buy it.
  • State governments make policies more affordable for people on low incomes by considering removing stamp duty from vehicle insurance policies developed by insurers for low-income drivers.
  • State governments consider tribunals as alternatives to courts to resolve vehicle accident disputes. One model is New Zealand’s Dispute Tribunal where insurance disputes and other matters are heard by an accredited referee whose decision can be enforced by a court.
  • Some third party property insurance policies include an Uninsured Motorist Extension (UME), which provides some protection if the driver’s vehicle is damaged by an uninsured motorist who is unable to pay. Standardising the UME in third party property policies to cover $5000 in damages would benefit low-income Australians who cannot afford comprehensive cover. If insurers are not willing to do this, the Australian Government should consider mandating that standard.

What do you think? What would you do to make car insurance more affordable for people on fixed incomes? Do you have car insurance? Do you think it should be compulsory?



    To make a comment, please register or login
    9th Nov 2017
    I am so sick of extra handouts for the so called "underprivileged" & the yobbos. The rest of us are supposed to pay for these bludgers for ever.

    At least third party insurance should be mandatory, no insurance no registration.

    This would have helped my neighbours daughter. She ran up the back of an expensive car, pushing it into the back of an even more expensive car. She was texting at the time, & uninsured. Isn't it surprising that she could afford $100 a month phone bill, but not to insure her car.

    Her car was a write off, & 4 years later she is still paying of the$32,000 repair cost of the damage she caused. While I believe she was ripped off to some extent by the repairers & insurance companies involved, she should not have been driving if she could not afford the monthly payments for at least third party accident coverage.

    Whilst showing her new latest tech phone to my daughter recently, she was complaining about being fined for being only a week over due with her rego. It appears she has not gained any sense in her spending habits.
    Old Geezer
    9th Nov 2017
    I don't even like answering my hands free phone system in my car which is voice activated. It is funny when they read out my voice messages as most of the time they make little sense.
    9th Nov 2017
    Ahhh the wisdom of youth, or lack thereof. Its all a matter of priority. Mobiles, selfies, texting. They'd be lost without we were.
    9th Nov 2017
    Third party property damage should be included as mandatory like CTP is on the rego. Comprehensive insurance can then be taken out as extra if you want to cover your own. If you can't afford it, you can't drive a car. It's simple. Just like it always has been, if you can't afford it, you can't have it.
    Old Geezer
    9th Nov 2017
    I've got a box trailer and it was cheaper for Comprehensive Insurance than Third Party. My cheap runabout car is the same.
    9th Nov 2017
    I suggest that compulsory 3rd party insurance to cover property damage should be compulsory and not negated by unlawful behaviour. I have been rear-ended by an uninsured driver who offered me $500 on the spot to save going through insurance. I declined his offer and left it up to my insurers, thankfully. The repair bill came to over $2500 and my excess was waived. Similarly many years before I was front-ended by an intoxicated driver who lost his insurance cover due to being over the limit. My car was a write off but I still had to pay the excess which was deducted from the settlement cheque. I thought I would sue him for the excess but my lawyer suggested otherwise. The other driver had lost his job (as a driver), had to pay damages to 2 insurance companies (he also damaged another vehicle) plus fines for DUI and he owed a finance company several thousand dollars for his own vehicle (which was also a write-off).
    Like all things, if you cannot afford something then you go without, harsh but reality.
    9th Nov 2017
    What I find obscene is the increase in 'excess'. I was getting rid of some old paperwork recently, and found some old insurance papers from 2007-2010. My excess was always $250-$300. Looked at some recent insurance quotes for car, caravan, house, contents, and ALL had excess of $795, $750, $800, $900 and $1000. Once again, premiums go up and up, whilst cover comes down and down.
    9th Nov 2017
    ...Whilst the market value goes down, so pay more for less. What a fort.
    9th Nov 2017
    People need to remember that driving is NOT a right. Its a privilege and one that must be paid for. If you can't afford it, you use public transport, walk or get a bike. Not expect special treatment just because you can't afford the purchase and running costs. And 'all costs' include insurance.

    So I agree with those who suggest making a minimum third party insurance mandatory at registration. And if you are caught without it, the vehicle should be confiscated until it is registered and paid for.
    9th Nov 2017
    And sort out the excessive fraud that is pushing green slips sky high.

    Insurance companies need to deal hard with the fraudsters and see them gaoled.

    Otherwise the compulsory insurance will just sky rocket as well.

    Making payments compulsory always ends up very very expensive.
    9th Nov 2017
    I had a car that was written off by an uninsured driver under the influence of drugs.My car was parked at the side of the road. He delayed going to court for over a year. He was charged and I was awarded $18,000 costs that he had to pay me. I was told I had to collect it. He returned to his native NZ and I had to pay out the lease on the car and I'm still waiting for the money 20 years later.
    Not Senile Yet!
    9th Nov 2017
    You cannot register a car in GB without Third Party Others is Compulsory!
    This at least cover damage to the BMW or Merc you might hit! is useless if the Diver is
    that's NOT Covered!
    Although is still Private Insurance Companies you have to produce your receipt when the Rigistration is renewed.....No recpt. No Rego!
    I believe it is a fair system that forces the driver to be responsible to & for others!
    We should introduce it here!
    But I would stop fining people for DUI...and letting them off with Licence cancellation only!
    Confiscate their Car to be sold at Auction to pay for Court Costs & Damage!
    Lets see them laughing about that??.
    Old Geezer
    9th Nov 2017
    Read something the other day that NSW is going to send refunds to those who bought Greenslips in the last 12 months.
    9th Nov 2017
    I'd like that Og. I got a note with mine telling me the huge increased cost was due to fraud. I was furious and officially complained.

    It isn't my responsibility to cover the costs of incompetent insurance management.

    The Greenslip was originally a little teeny charge to cover children in accidents if I remember correctly and has ended up a rip off.
    10th Nov 2017
    The Brotherhood of St Lawrence - a registered charity - relies both directly & indirectly on either the goodwill of donors (some though religious affiliation) or govt funding.
    Insurance companies being 'for profit' organizations are in it for the few quid they extract from gullible consumers looking to diminish risk. The flip side being insurers that look to diminish claim payouts.
    It would seem apparent that the good Brothers, being familiar with their 'client' battler's costs of living are perhaps therefore aware due to the number of instances when this issue is a contributory factor.
    Current car owner/driver statistics would suggest something in the order of one in five (and rising) are committing an offence for one or more of the following;
    Unlicensed, ie, either lapsed, disqualified or never procured.
    Intoxicated or under influence of drugs or unlawful substance.
    Unregistered vehicle, incorrect plates or expired rego.
    Unroadworthy vehicle.
    Outstanding warrants or unpaid fines.
    Equally apparent is the fact responsible mug punters are picking up the tab for the "punish(ed) poor people" who "are dependent on (their car) for daily living".
    "Dependant", why , how ? This dependency has neither been established or confirmed. Perhaps justified by their clients' estimation or acknowledged by the brotherhood, themselves reliant on the goodwill of society.
    To be considered "poor" does not constitute entitlement to owning/driving a motor vehicle.

    Mandatory insurance would be a waste of time as the numbers suggest road users are increasingly shrugging off responsibilities - people would simply refrain from registering vehicles, renewing licences or paying fines.
    Welcome to an (increasingly) dystopian society sans the good work of the Brotherhood.
    10th Apr 2018
    I agree with most comments, 3rd party insurance receipt or no rego. All too frequently, guilty party to an accident does not have any insurance at all ! Why should the responsible person be penalised while the other party gets off scott free ?

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