Sabrina N. Gordon, Business Reporter

A traffic snarl at Heroes Circle, Kingston, in this December 2007 Gleaner photo. Jamaica's insurance industry estimates that 30 per cent of vehicles on the roads are not insured.

Jamaica's insurance industry estimates that one in every three vehicles on the roads is either uninsured or has illegal papers, and as a result, companies lost out on $3 billion of premiums last year.

In actuality, the Insurance Association of Jamaica (IAJ) has calculated loss at $1.5 billion for providers of motor coverage for six months ending June 2007.

Its final $3 billion projection to December was derived by doubling that figure.

"There is a thriving business whereby unscrupulous individuals are offering fake cover notes and certificates," said Annette Robotham, IAJ general manager, speaking with Sunday Business.

New system

But the IAJ has since banded with the police and tax authorities to tackle the problem, and is now building out a new system to track down drivers whose papers are suspect.

According to a recent IAJ study, an estimated 30 per cent of motor vehicles are not legally insured.

Registered vehicles total 500,000. But only 350,000 are on the books of motor insurers as having coverage, representing 70 per cent of legally registered vehicles.

That 150,000 shortfall represents an erosion of the market share of IAJ members, said Robotham.

The IAJ has not come up with a profile as to the 30 per cent of illegally insured drivers, but theorises that it includes vehicles of all types and value - both low and high end.

The IAJ says motorists continue to avoid insurance because the law has loopholes, and the penalties are not stringent enough.

"The legislation does not provide adequate punitive powers to dissuade people from 'trying a thing'," said Robotham.

"Further, many areas of Jamaica are infrequently policed so individuals are able to get away with it."

Vehicles prominently display a decal of their registration and expiration date, making it fairly easy for the traffic police to track the compliant.

But the currency and legitimacy of insurance papers can only be ascertained by stopping motorists and doing a physical examination of documents.

The new system being contemplated is expected to give the police access to computerised records on insurance, eventually.

The project - a collaboration between the IAJ, the Jamaica Constabulary Force, Inland Revenue Department and Ministry of Finance - will allow insurance companies to electronically transfer insurance information to government entities.

The system, once operational, will allow insurance companies and brokers to print cover notes and transmit that information, in real time, to the police and the Inland Revenue Department.

With the information, the Inland Revenue Department will be equipped to validate cover notes before issuing motor vehicle registrations.

Electronic means

Similarly, the traffic police will be able to query the insurance status of a vehicle by radio and later by electronic means, even before approaching a vehicle, based on a query of the licence- plate number.

The system being developed is expected to move to its pilot phase in six to eight months.

The motor-vehicle insurance sector was valued at approximately $5 billion, measured by premium income, as at June 2007, capturing an estimated 43 per cent of the wider general insurance industry whose estimated value at that date was $11.6 billion.

General insurance includes homeowners or property, fire and consequential loss, motor and liability.

The industry figures for 2007 have not yet been compiled. But in 2006, motor's gross premiums topped $8 billion, according to the IAJ, while the entire insurance sector, including life underwriters, earned gross premiums of $18 billion in 2006, according to Financial Services Commission data.

The IAJ anticipates that the system will reduce the number of uninsured vehicles on the Jamaican roads and increase the level of insurance protection.

sabrina.gordon@gleanerjm.com