Insurance Helpline, With cedric Stephens

Question: A Honda CRV ran into the back of my car in late October. It tried to get away. Fortunately, the heavy morning traffic forced the driver to stop. He offered me $1,000 or $1,500.

My car, he felt, was not badly damaged. When he realised that I was not a push-over, he showed me certificates of registration and fitness. Both were valid.

He had admitted that his vehicle was not insured. How can a vehicle be licensed up to June 2008 and not be insured?

I have found out that there are many uninsured vehicles on our roads. Insurers say they can do nothing. Inland Revenue says it is the responsibility of the National Works Agency (NWA) and the police. Do you have any ideas?

- hortense@anbell.net

Answer: Uninsured vehicles create many problems. The hardships that they cause should be occupying the minds of our political leaders - much like 'alternative investment schemes'.

Members of the middle class like yourself, and many poor people (like me) suffer when the Motor Vehicles Insurance (Third Party-Risks) law is broken and accidents occur.

Solving this problem should be of interest to Audley Shaw and Don Wehby in the Finance Ministry and the people at the Financial Services Commission.

Government collects $165 on each $1,000 of premium that is paid for motor insurance. This is in the form of general consumption tax.

Those who do not buy insurance, cheat government out of revenue. Nearly $500 million is lost each year by my estimate.

This assumes that one out of every four vehicles is uninsured. When other losses - unpaid claims for personal injury, lost income, medical and other expenses and property damage - are added, the price tag runs into billions of dollars.

Uninsured vehicles are not limited to Jamaica. Estimates in the United Kingdom suggest that five percent of all the vehicles there are not insured. In the United States of America, the figures vary by location. Some states have a compliance rate of 96 per cent. Others have an uninsured population as high as 26 per cent. Unfortunately, as you have found out, few persons here - including insurers and the police - are doing anything about the problem.

impact of uninsured vehicles

My guess is that there will be concerted action only when GoJ gets a sense of the impact of uninsured vehicles on the society and the revenues that it is losing.

U.S. authorities have done many things during the last 80 years to deal with uninsured vehicles. These include:

1. Improved enforcement and tracking techniques to enhance compliance with compulsory insurance and financial responsi-bility laws.

2. The provision of low-cost motor policies.

3. The creation of uninsured and underinsured motorist insurance coverage.

4. The non-payment of claims to persons whose vehicles are not insured (no-pay, no-play laws).

Proposals for the inclusion of a provision in gasolene prices (pay-at-the-pump laws) to cover the cost of compulsory motor insurance have also been considered.

Used alone or in combination, advocates of these measures argue they will help to reduce costs associated with uninsured motorists.

In the United Kingdom, victims of uninsured vehicles and untraced drivers are paid out of a special fund. Money to pay these types of claims comes from a special levy that is borne by all buyers of motor insurance. Lawbreakers in that country are said to be feeling the heat. Uninsured vehicles there are being seized and crushed.

Compulsory insurance for motor vehicles operating on public roads was set up to benefit society. Persons who operate uninsured vehicles create serious financial and other problems when they cause accidents.

In addition, they do not pay their fair share of taxes. The political leaders in the Finance Ministry should provide the leadership to solve this problem.

With the best will in the world, the police, insurers, Inland Revenue and the NWA will not find a solution unless Messrs. Shaw and Wehby deem it a priority - like th investment schemes.

Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel write to The Business Editor or contact Mr. Stephens at aegis@cwjamaica.com