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?


Related articles:
Insurance, accidents & your rights
Weird insurance claims
Making an insurance claim

Ben Hocking
Ben Hocking
Ben Hocking is a skilled writer and editor with interests and expertise in politics, government, Centrelink, finance, health, retirement income, superannuation, Wordle and sports.


  1. This is an old post for sure, being 2017. I came across as I find my self in the situation where I was not at fault and the other party took the full blame and their insurance company said we will fix your car. I’m a pensioner looking after an adult child with Down Syndrome – been his primary carer for all his life. I have had the car insured since purchased. We depend on that car for my son’s therapy needs which involves a reasonable amount of travel. Although the clear coat was not the best, it wasn’t the worst either. Mechanically it was well taken of, even the 80,000 klm auto transmission fluid was changed yearly instead of every several years. The car was taken through a voluntary road assessment and the repairs were carried out about a bit over a year ago. Just making it clear it was in good repair and roadworthy. Anyway, the unthinkable happened, on the Last really hot day we were likely to have till next summer, we were driving to the beach, a car turned into the t intersection that i had right of way in. I couldn’t stop, not enough space. I managed to avoid a collision into the back of the ute – one with a very high mounted tray – as decapitation was a distinct outcome. So went over the edge of the road trying to avoid it and that also involved going into a two metre ditch, then having to avoid the pylons of a defunct bridge to avoid a head on that way, managed to go through the tight space between two pylons, but the roof got dented and the driver side external mirror was destroyed, and that was likely when the windscreen smashed. On coming to rest just on the other side of the bridge, when i got out i found the bumper destroyed, the driver side wheel flat and at an angle it shouldn’t be. Most of the car survived unscathed. The car is fixable, but even before it was assessed, it was indicated by my insurance company that because it is old its market value determines whether it will be fixed or not. They Mentioned it was around $2,000 . So it is on the cards it will be deemed a write off. Yet I cant possibly buy a car that has been taken care of so well for $2,000, so I recon a $2,000 car is likely going to need a lot of repairs. So this is part of the poverty problem. Even with insurance and being at no fault, I am unlikely to be allowed ot have my good car repaired, because they are focused on what the care is worth as a $ amount. In the meantime, a bloke with a $20,000 car is entitled to have it repaired even though he can probably afford to replace it, if the repair goes to 20K . So those of us on the breadline, are even more behind the 8 ball. If people want us to have sound cars on the road to avoid accidents, then our sounds cars should be fully compensated with needed repairs when someone is fully at fault.

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