Thu | Aug 16, 2018

Cedric Stephens | Curbing the problem of uninsured drivers

Published:Sunday | April 29, 2018 | 12:00 AM
A police investagor takes photo of this crashed vehicle that was said to be operating illegally as a robot taxi in this 2007 photo. The Insurance Association of Jamaica estimates that less than half of the vehicles on Jamaica's roads are insured.

Is there a disconnect between the priorities of the new leaders of the Insurance Association of Jamaica (IAJ) and the average insurance buyer?

This question assumes that even though IAJ is a lobby group that exists mainly to promote the interests of its members, some of the association's 'agenda items' and those of the public often overlap.

Was last Sunday's lead story in the Sunday Business section about the coming of an 'online motor insurance portal', among other things, an example of the intersection between the public's and industry's interests? Was it simply public relations in action, did the reporter get it wrong, or was it a combination of all three?

Will the average motorist benefit directly and tangibly from the new portal? Will it really cut down on lawlessness on the roads, put those who sell counterfeit cover notes and certificates of insurance out of business, or reduce the number of uninsured vehicles?

Call me a sceptic, but based on my research, I do not believe the Insured Vehicle Information System (IVIS) will achieve any of these admirable goals. More important, the new system will not lead to lower motor premiums in the short or long term.

The US Insurance Information Institute says that more than half of the 50 states "have passed laws and begun to develop and implement online auto insurance verification systems to identify uninsured motorists. In 2015, 13 per cent of motorists, or about one in eight drivers, was uninsured, according to a 2017 study from the Insurance Research Council (IRC)".

Most inexplicably, it continues: "The percentage (of uninsured drivers) has been rising since it hit a record low of 12.3 in 2010. Florida had the highest percentage ... 26.7 per cent, and Maine had the lowest, 4.5 per cent. IRC measures the number of uninsured motorists based on insurance claims, using a ratio of insurance claims made by people who were injured by uninsured drivers relative to the claims made by people who were injured by insured drivers."

 

What are the Stats?

 

How does IAJ calculate the number of uninsured drivers? What is the number of uninsured vehicles on Jamaica's roads?

The association estimates a vehicle population of 750,000. Of that amount, 310,000, or 42 per cent, are said to be insured. This means that most of the vehicles - 58 per cent - are uninsured. Contrast this with Florida's 26.7 per cent, with a more robust law enforcement environment and higher per capita income.

Is driving an uninsured vehicle plus the existence of a black market partially about the cost of insurance, or is it solely a law enforcement issue as the article appears to imply? Has the industry learnt anything from the local utility's initiatives to stamp out illegal electricity connections?

Traffic tickets issued for driving without insurance, as compared to other traffic offences, according to police statistics, do not match the IAJ's estimate of uninsured vehicles. No data is recorded about the number of tickets that were issued for driving without insurance coverage.

Even if the incidence of driving uninsured vehicles could be accurately established, it is still not clear how IVIS would benefit the average consumer or someone who buys uninsured motorists' coverage as an add-on to his comprehensive policy.

On the other hand, even if I am wrong and IVIS reduces the number of uninsured vehicles on the roads, insurers would stand to earn more premiums, and Government would collect additional revenues via the consumption tax. Consumers would not receive any monetary benefit other than the ability to check if another vehicle was insured, as required by law.

The Motor Insurers' Bureau was founded in the United Kingdom over 70 years ago. It is still in operation. This entity provides compensation for victims of accidents caused by uninsured and untraced drivers. The longevity of the company is another example of how difficult it is to stamp out the driving of uninsured vehicles.

Despite the hopes of the new IAJ president and the millions of dollars spent on IVIS, the problem of uninsured drivers in Jamaica will not fall to the level achieved in Maine.

Three other priorities, namely, road safety, fraud and insurance penetration, were identified in the presidential address. To be fair to him and the group that he heads, concrete details were provided in the article about the association's initiatives to reduce the frequency of road fatalities involving motorcycles. This is praiseworthy.

On the other hand, that body appears, from information on its website, to be absent from the public debate that I tried to start about other aspects of road safety: distracted driving and the new Road Traffic Bill, and the liberalisation of the use of ganja and its impact on driving behaviour.

The association, in my judgment, receives failing grades in the other two areas. On the matter of insurance fraud, the industry has been talking about it for about 20 years and done very little to combat it. Unlike its UK counterpart, the Association of British Insurers, IAJ does not say what extra costs the practice imposes on honest consumers. The incoming president is, however, on record in this newspaper - March 1, 2015 - that insurers' main strategy for dealing with the problem is to pass on the costs to honest customers.

In the meantime, in Zimbabwe - which, according to Forbes magazine, "suffered the second most severe episode of hyperinflation in recorded history, reaching 89.7 sextillion (10^23) per cent in 2008" and 348 per cent last year - insurers are in the process of introducing counter-fraud measures using developed world standards.

Trust is one of the many factors that contribute to more people buying insurance. Does the Jamaican population trust insurance companies? A 2014 study carried out in all parishes by the University of the West Indies provides answers to this question. Is the fair treatment of customers at the heart of how insurers deal with their policyholders?

Nearly five months ago, I tried to start a public debate on the subject in this space. I am still awaiting an industry response.

Greater insurance penetration will only begin when we start to exchange ideas. I hope that IAJ's new president will not find these opinions unwelcome as he begins his term. A so me see it, a so me say it!

- Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: aegis@flowja.com