Insurance: Opinion: Why is third party property damage not compulsory?

By John Grant AA Insurance claims records for 2009 indicate that over a third of accidents involving 2 or more cars are caused by uninsured motorists. These uninsured drivers are racking up huge bills. Some recent examples of this include:

• A young driver who ran into the back of another vehicle causing NZ$25,200 damage to the other vehicle.
• Another uninsured driver racked up a NZ$65,065 bill when they failed to give way at an intersection and collided with a camper-van.

There have been many estimates at what percentage of drivers on the road are uninsured. This ranges from lows of around 7% to this report from AA Insurance indicating it could be as high as 33%. The financial implications of this runs in to many millions of dollars. Some of the insurers have now set up their own debt collections companies to tackle the problem. The previous Labour government, and championed by the then Minister of Transport Safety, Harry Duynhoven, advocated compulsory third party as a solution. The industry has generally resisted this call and introduced initiatives like "Uninsured Motorists Extension". This feature was provided by Insurance Council members under Third party only insurance policies and provided up to $3000 cover where the driver was not at fault and able to identify the other party. Insurers also introduced no blame and no excess terms for comprehensively insured motorists where they were not at fault, and also able to identify the at fault party by name, address and car particulars. However the debts being racked up by these uninsured users of the road now run into many millions of dollars. What most insured drivers are not aware of is that recovery action is initiated in their name. Therefore their insurer may require them to attend Dispute Tribunal or Court proceedings with the usual inconveniences and time issues involved. This process can also be very confronting. If the situation is as bad as the AA Insurance figures suggest then the costs to all insured motorists must be significant. After all, if drivers are deciding not to insure their cars then how many of them will make repayments to debt collectors? Unrecovered debts flow back to insured motorists in the form of higher premiums. The issue of uninsured drivers is an age old chestnut and many are sick and tired of the debate. These days it has strong connections with the boy racer fraternity who seem more interested in adding extras to their cars than insuring them. The reality is that if insurance was available for such modified vehicles then the cost would be seen as prohibitive. Probably more than they paid for the car in the first place. Third party insurance is compulsory for both personal and property injury in Britain, but is only compulsory for property injury in Australia.  Many of the same insurers in New Zealand who are opposed to compulsory third party insurance in New Zealand help administer the scheme in Australia. If the true economic costs of the current non compulsory scheme was known, and if we are to believe the one third of drivers being uninsured, then perhaps the time has arrived for this old chestnut to be dragged out and finally resolved. The cost of third party property damage can be as low as $180 a year. See all comparisons of car insurance policies here on interest.co.nz.