Friday, September 26, 2014

Uninsured Vehicles

This article was first published in the IIB Bulletin, 2014, Vol. 1, Iss. 2, pp-6-7; Co-authors: Jacob Thomas (IIB) and M.S.Jayakumar (IRDA)
https://iib.gov.in/IRDA/Articles/IIB%20Bulletin%20Q2%202014-15.pdf

Third Party (TP) liability is compulsory for vehicles or drivers in many countries across the world. In India, Section 146 of Motor Vehicles Act [MVA] (1988) mandates TP liability insurance of all motor vehicles in the country. But noninsurance of motor vehicles is a hard reality, not just in India, but also across the world.

Uninsured vehicles not only increase the cost of Insurance for those who buy the cover but also result in huge costs to the Insurance companies. In the USA, a report by the Insurance Research Council (IRC) estimated that $2.6 billion was paid by insurers to cover uninsured motorist claims in 2012.

“In addition to paying for insurance that covers their own actions, insured drivers pay a portion of the costs incurred by drivers without insurance through uninsured motorist (UM) coverage. For insurers, costs associated with UM claims can be substantial.”.... Uninsured Motorists, 2014 Edition

In a study done by IIB, it was found that out of the 32.9 million vehicles registered in India (excluding two wheelers), 9.5 million were uninsured. If the two wheelers are included, a whopping 55% of vehicles on Indian roads were uninsured in the year 2012.

These statistics are alarming. In an attempt to understand if the other countries around the world also suffer from the same malaise, we collated the available information on percentage of uninsured vehicles for various countries.

Source: Compiled by the authors from various sources

In the USA, the IRC report estimated that 12.6% of the motorists were uninsured in 2012. Oklahoma State had the highest percentage of uninsured motorists, at 26 percent, and Massachusetts had the lowest, at 4 percent.  Penalties and stricter regulations did not help in improving this statistic. Though there seemed to be some relation with unemployment.

Sustained efforts by Motor Insurance Bureau (MIB) of UK have seen a significant fall in the number of uninsured vehicles in the country over the last decade. Police enforcement activity since 2005, combined with the introduction of Continuous Insurance Enforcement (CIE) in 2011 has seen a near 50% reduction in uninsured driving on UK roads, as per a MIB report.

The Italian association of insurance companies reported that 8% of the total vehicles on Italian roads were uninsured in 2013. It also went on to indicate that a drop in the premium for third-party insurance did not result in improving the figures.

According to TISPOL, there were 7.6 billion registered vehicles in Greece, in 2014. As per Greek Union of Insurance Companies, about 10% of them are uninsured. This is in spite of the falling premiums in Greece, due to fierce competition between insurance companies and heavy fines.

Percent of uninsured vehicles in Brazil and South Africa is even higher than in India. We do not expect the situation to be any better in many other emerging countries.

There are large numbers of uninsured vehicles on the road across the globe. This poses a grave danger to the society as a whole. It also results in economic loss to the insurers. Apart from penalties and stricter regulations, a nationwide, sustained mission, supported by enforcement agencies and other stakeholders is the need of the hour, in all countries suffering from this plague.


“It will not be an exaggeration that this menace has to be tackled on a Mission Mode, a la Polio eradication!”...R. Raghavan, CEO, IIB
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