Subsidising Unsafe Road Use

Abstract

Motor accident regulation of compulsory third party (CTP) insurance in Australia and New Zealand has the effect of taxing safe-road use and subsidising unsafe road-use. This regulation has significant safety consequences as it inhibits insurers from encouraging road safety. In the UK, where the regulatory environment is different, there is a rapid growth in technology-enabled usage based insurance (UBI). UBI is being used to encourage safer driving, particularly among high risk groups. In the absence of reform to CTP regulation, there is a high possibility that in this decade Australia and New Zealand will fall significantly behind the UK in reducing the road toll.