Should car insurance be made optional.

[stadler]

Should we scrap compulsory car insurance and make it optional? I would be interested to know what others think of this? I was just reading the other recent thread on the forum about the cost of having a car and this is definitely one of the major costs. Making car insurance optional could save people a lot of money and help make having a car cheaper.

In both New Zealand and the US state of New Hampshire car insurance is entirely optional. In these two places there is no legal requirement to have car insurance and you can drive any vehicle without it. This does not seem to have caused any issues there.

Personally i absolutely hate the whole concept of insurance. You are paying money just in case a very rare incident happens where you need to make a claim. I personally never purchase any type of insurance unless it is legally required. Lots of other types of insurance are optional. Home insurance is optional. Pet insurance is optional. Life insurance is optional. Travel insurance is optional except for some countries that require it. Lots of people (myself included) never purchase these optional insurances and just pay out of their own pocket on the rare occassion that anything were to happen.

I am in my sixties now and i have been driving since i was about eighteen and have therefore been paying for car insurance for over fourty years that i have never had to use. I have never once had to use my insurance. Not once have i ever had any accident or incident or had to make a claim on my insurance for any reason. So i have just been wasting thousands and thousands of pounds for over fourty years on compulsory car insurance that i have never had any use for. I hate to think how much i have spent over the years but it must be tens of thousands by now. I could have saved an enormous amount of money if it was optional. This always annoys me so much that i am forced to buy car insurance that i do not even want. I only use my car a few times a week (i much prefer the train and bus) but it is so annoying paying for insurance every year that i do not use or want.

I would much rather just pay out of my own money if anything happens. If i was involved in an accident or there was an issue with my car i would rather i just pay out of my own pocket. This would be much much much cheaper than paying for car insurance for decades.

I know there is the argument of what if someone causes an accident but does not have the money to pay out. But that same argument could be said for so many other things that do not involve driving and do not require mandatory insurance. I do not see why driving should be treated differently to so many other things that could cause accidents.

New Zealand and the US state of New Hampshire seem to be the only two places in the Western world where car insurance is entirely optional and not legally required (most other places where it is optional are third world countries) but it seems to work perfectly fine in these two places. As far as i can see New Zealand and US state of New Hampshire have not experienced any significant issues by making it optional. So it makes me think it could work perfectly fine here too.

I think it is something the government really ought to consider. It is at least worth looking in to to see if there is a way it could be made to work. I would be interested to hear what others think of this? Is there any chance the UK could ever make car insurance optional?

 

[Bletchleyite]

Absolutely not, because you could do a million quid's worth of damage to a train (wasn't that the world's highest motor insurance claim ever?) and not have the means to pay for it.

You can choose not to take insurance covering your risks by taking third party only. It should not be optional to cover the risks you pose to other people.

 

[signed]

In most cases, car insurance is not to cover you, it's to cover the other party you injure/damage, and that can cost a significant amount of money, especially if you have to pay for rescue services... (in the US mostly).

 

[Wolfie]

Absolutely not, because you could do a million quid's worth of damage to a train (wasn't that the world's highest motor insurance claim ever?) and not have the means to pay for it.

You can choose not to take insurance covering your risks by taking third party only. It should not be optional to cover the risks you pose to other people.

Absolutely. Why should someone feckless be able to kill or maim someone and face no financial responsibility?

 

[signed]

I do not see why driving should be treated differently to so many other things that could cause accidents.

Because those accidents are very likely much more likely, costly and dangerous

 

[ainsworth74]

Absolutely not, because you could do a million quid's worth of damage to a train (wasn't that the world's highest motor insurance claim ever?) and not have the means to pay for it.

I reckon you could do a million quid's worth of damage to a person in a nasty accident. Loss of faculty, loss of future earnings, care needs above those met through the NHS, etc etc. You cripple say a healthy twenty five year old I bet you could start pushing high six figures all in. Do it to say a family and I reckon you're easily hitting potentially a million. So I mean as long as you're happy to take the risk that you're basically going to completely wreck your finances for the rest of your life I guess you could skip insurance. Personally I'm happier paying £400 per year so that in the unlikely event I do have an at fault accident that comes with a large personal injury claim I won't be on the hook for a huge sum I do not have to hand. However I think the bigger issue is...

You can choose not to take insurance covering your risks by taking third party only. It should not be optional to cover the risks you pose to other people.

Quite. Car insurance is to protect other people, not you.

 

[signed]

Pet insurance is optional.

The fact that pet insurance is optional is very likely playing a part in the number of abandonment and put downs, it should absolutely be mandatory everywhere. Animals can get injured very badly and the smallest work in the ER can run you down thousands

Travel insurance is optional except for some countries that require it.

Good luck with paying the 10 of thousands in hospital bill if you ever have a major accident in the US (and that happens) + the repatriation fees.

Whereas you could have purchased (or have as a credit card perk) a £100 a week (roughly) travel insurance that would have covered the whole thing + some (paying to send your travel companions home, paying a family member to see you while in hospital before you get repatriated...)

I only use my car a few times a week (i much prefer the train and bus) but it is so annoying paying for insurance every year that i do not use or want

I do agree that Insurances should consider low mileage as a reduction of the premium, but that's another topic

 

[Djgr]

Should we scrap compulsory car insurance and make it optional? I would be interested to know what others think of this? I was just reading the other recent thread on the forum about the cost of having a car and this is definitely one of the major costs. Making car insurance optional could save people a lot of money and help make having a car cheaper.

In both New Zealand and the US state of New Hampshire car insurance is entirely optional. In these two places there is no legal requirement to have car insurance and you can drive any vehicle without it. This does not seem to have caused any issues there.

Personally i absolutely hate the whole concept of insurance. You are paying money just in case a very rare incident happens where you need to make a claim. I personally never purchase any type of insurance unless it is legally required. Lots of other types of insurance are optional. Home insurance is optional. Pet insurance is optional. Life insurance is optional. Travel insurance is optional except for some countries that require it. Lots of people (myself included) never purchase these optional insurances and just pay out of their own pocket on the rare occassion that anything were to happen.

I am in my sixties now and i have been driving since i was about eighteen and have therefore been paying for car insurance for over fourty years that i have never had to use. I have never once had to use my insurance. Not once have i ever had any accident or incident or had to make a claim on my insurance for any reason. So i have just been wasting thousands and thousands of pounds for over fourty years on compulsory car insurance that i have never had any use for. I hate to think how much i have spent over the years but it must be tens of thousands by now. I could have saved an enormous amount of money if it was optional. This always annoys me so much that i am forced to buy car insurance that i do not even want. I only use my car a few times a week (i much prefer the train and bus) but it is so annoying paying for insurance every year that i do not use or want.

I would much rather just pay out of my own money if anything happens. If i was involved in an accident or there was an issue with my car i would rather i just pay out of my own pocket. This would be much much much cheaper than paying for car insurance for decades.

I know there is the argument of what if someone causes an accident but does not have the money to pay out. But that same argument could be said for so many other things that do not involve driving and do not require mandatory insurance. I do not see why driving should be treated differently to so many other things that could cause accidents.

New Zealand and the US state of New Hampshire seem to be the only two places in the Western world where car insurance is entirely optional and not legally required (most other places where it is optional are third world countries) but it seems to work perfectly fine in these two places. As far as i can see New Zealand and US state of New Hampshire have not experienced any significant issues by making it optional. So it makes me think it could work perfectly fine here too.

I think it is something the government really ought to consider. It is at least worth looking in to to see if there is a way it could be made to work. I would be interested to hear what others think of this? Is there any chance the UK could ever make car insurance optional?

Think you are in a minority of one with your (ahem) interesting viewpoint.

 

[AlterEgo]

Absolutely not, because you could do a million quid's worth of damage to a train (wasn't that the world's highest motor insurance claim ever?) and not have the means to pay for it.

You could do that without a car.

You can choose not to take insurance covering your risks by taking third party only. It should not be optional to cover the risks you pose to other people.

It is entirely optional in 99% of life’s everyday interactions.

The best argument in favour of insurance is it moderates the irresponsible behaviour of some drivers.

 

[Bletchleyite]

I do agree that Insurances should consider low mileage as a reduction of the premium, but that's another topic

Noting that you're in France where it might work differently, but in the UK you certainly do get a cheaper premium for a low mileage. Indeed during COVID a load of insurers were forced to refund premiums to people who had done far lower mileages due to being required to work from home instead of commute.

== Doublepost prevention - post automatically merged: 20 Nov 2024 ==

You could do that without a car.

A car is a specifically dangerous thing, though, and you're much more likely to do damage or cause injury with it. Road use is by far the most dangerous thing we do day to day.

It is entirely optional in 99% of life’s everyday interactions.

Interestingly in some countries carrying a general third party liability insurance is, while not mandatory, the norm. Germany is one such country. Makes things a lot easier if you do, for instance, cause an accident as a pedestrian or cyclist*, or just accidentally kick a football through someone's window. Though it's also of note that UK home contents insurance policies often include it for free - just hardly anyone knows that. Some limit cover to liability arising from home ownership (e.g. a tile falling off your roof and smashing next door's car windscreen), but some include general third party cover that only excludes things like the use of cars.

* I actually do have cycle insurance which includes third party cover, by the way, it's close to free when you take specific theft insurance for more expensive cycles, which says a lot about how likely/large a payout is!

The best argument in favour of insurance is it moderates the irresponsible behaviour of some drivers.

There's also that. The same drivers are likely the ones who wouldn't cough up in the event they did damage your car.

 

[signed]

It is entirely optional in 99% of life’s everyday interactions.

Probably because a car accident is much more likely to impact your life (huge bills, injury...). A rough calculation off the UK Gov data shows that roughly 20 to 25% of the recorded collisions are causing injury, and 10% of the injury ones (1 to 2% of the whole collision statistic) causing death.

And even then, we know all well that a majority of people depend on a car and having a wrecked car that you can't fix because of someone else would be very bad.

but in the UK you certainly do get a cheaper premium for a low mileage. Indeed during COVID a load of insurers were forced to refund premiums to people who had done far lower mileages due to being required to work from home instead of commute.

Thanks for the clarification, here it is very dependant on the provider

 

[Noddy]

Looking at New Zealand what we would call third party injury insurance is included as part of an annual car registration fee.

 

[SuspectUsual]

New Zealand and the US state of New Hampshire seem to be the only two places in the Western world where car insurance is entirely optional and not legally required (most other places where it is optional are third world countries) but it seems to work perfectly fine in these two places. As far as i can see New Zealand and US state of New Hampshire have not experienced any significant issues by making it optional. So it makes me think it could work perfectly fine here too.

In New Zealand the equivalent of what we call third party insurance is included in their equivalent of our annual car tax. Not sure about New Hampshire

[EDIT] just seen @Noddy made the same point, apologies

 

[Magdalia]

So I mean as long as you're happy to take the risk that you're basically going to completely wreck your finances for the rest of your life I guess you could skip insurance.

In most cases where there is a big financial liability and no insurance, the driver causing the accident/injury would be bankrupted but the costs don't go away. The taxpayer would have to foot the bill.

A car is a specifically dangerous thing, though, and you're much more likely to do damage or cause injury with it.

A car is a heavy and fast moving missile. It is the laws of physics.

 

[stadler]

Looking at New Zealand what we would call third party injury insurance is included as part of an annual car registration fee.

In New Zealand the equivalent of what we call third party insurance is included in their equivalent of our annual car tax. Not sure about New Hampshire

[EDIT] just seen @Noddy made the same point, apologies

In that case then maybe that is what we ought to look in to doing here. Including the third party insurance as part of the road tax sounds a far better option. I would even be happier paying a higher road tax if it meant that i did not need to purchase car insurance.

 

[Bletchleyite]

In that case then maybe that is what we ought to look in to doing here. Including the third party insurance as part of the road tax sounds a far better option. I would even be happier paying a higher road tax if it meant that i did not need to purchase car insurance.

The downside of this is that reckless drivers don't pay more, so we all pay more instead.

 

[signed]

In that case then maybe that is what we ought to look in to doing here. Including the third party insurance as part of the road tax sounds a far better option. I would even be happier paying a higher road tax if it meant that i did not need to purchase car insurance.

Who is going to do the insurance bit then? I would very much assume the chosen insurance company would have a massive monopoly and what tells us something like that would come cheaper

 

[66701GBRF]

How can anyone think making insurance optional is a good idea?!?

 

[Bald Rick]

In that case then maybe that is what we ought to look in to doing here. Including the third party insurance as part of the road tax sounds a far better option. I would even be happier paying a higher road tax if it meant that i did not need to purchase car insurance.

Even though it would cost you, personally, substantially more in total?

 

[SuspectUsual]

How can anyone think making insurance optional is a good idea?!?

Well yes, exactly.

 

[Ediswan]

Regarding New Hampshire:
https://mm.nh.gov/files/uploads/nhid/documents/nh-auto-guide.pdf

New Hampshire motor vehicle laws do not require you to carry auto insurance, but you
must be able to demonstrate that you are able to provide sufficient funds to meet New
Hampshire motor vehicle financial responsibility requirements in the event of an “at-
fault” accident. If you are unable to meet these requirements your driving privileges in
New Hampshire may be suspended.

Those requirements are of the order of tens of thousands of dollars. The main 'risk' in the US is probably being sued for everything you own.

Edit: The vast majority of NH driver have insurance. NH unisured drivers is 6-9%, UK is 4%. All depending on whether you trust Google AI.

 

[stadler]

Even though it would cost you, personally, substantially more in total?

Would it actually be more expensive. Surely if the third party car insurance was included as part of the road tax than it would be cheaper than paying for the two of them separately. Even if they increased the road tax to cover it then i still stuggle to see how it would be more expensive than paying the two separately. I suppose it would depend on the government but i am sure it could actually be cheaper for a lot of people.

Also it would be a lot fairer if the third party insurance was included as part of the road tax as everyone would pay the same amount. Everyone with the same type of vehicle pays the same amount of road tax. The car insurance rates at the moment are ridiculous with people paying massively different amounts to each other. So if the third party insurance was included as part of the road tax than it would make the pricing a lot fairer.

 

[signed]

Also it would be a lot fairer if the third party insurance was included as part of the road tax as everyone would pay the same amount.

Insurance company do not see that that way, and rightfully so

People who are good drivers should be able to get substantially lower premiums, but people who are bad/reckless drivers (and there are many) should be punished accordingly

For reference, in France, the impact of your record on your insurance is measured as Bonus/Malus system

You start your insured life as a 1, meaning you pay whatever the insurance company wants, if you are a good driver, every year you win 0.05 out up to the Bonus 50 (0.50) of paying only 50% of the premium after 13 insured years, and that bonus you keep it for life once you're insured (unless you cause an accident).

If you cause a fully at-fault accident, you loose 25% of that saving, if you cause a part-fault accident you loose 12.5% up to double the premium (Malus 50)

 

[66701GBRF]

Also it would be a lot fairer if the third party insurance was included as part of the road tax as everyone would pay the same amount. Everyone with the same type of vehicle pays the same amount of road tax. The car insurance rates at the moment are ridiculous with people paying massively different amounts to each other. So if the third party insurance was included as part of the road tax than it would make the pricing a lot fairer.

Like it or not car insurance prices are based on risk, or at least perceived risk. That's why different people pay different costs. Expecting the government to underwrite millions of policies at 10s of millions of pounds is frankly ridiculous.

 

[SuspectUsual]

Also it would be a lot fairer if the third party insurance was included as part of the road tax as everyone would pay the same amount.

Why on earth should everyone pay the same? As a self-professed "40 years and no accidents" driver, surely you want the cost of your insurance to reflect your apparent lower level of risk. Should you pay the same as a 17 year old in a knackered old Corsa?

 

[66701GBRF]

Why on earth should everyone pay the same? As a self-professed "40 years and no accidents" driver, surely you want the cost of your insurance to reflect your apparent lower level of risk. Should you pay the same as a 17 year old in a knackered old Corsa?

Exactly!

 

[stadler]

Who is going to do the insurance bit then? I would very much assume the chosen insurance company would have a massive monopoly and what tells us something like that would come cheaper

Surely it could be done by the government. Instead of using private insurance companies it would just be the government providing it.

I am not sure how New Zealand does it. But it might be worth looking at how they do it there and copying whatever the do.

 

[signed]

Surely it could be done by the government

We (as in most developed countries right now) struggle to find money to finance healthcare, education, public transport... Surely underwriting billions of £/€/$ is not a good use of public funds, better leave that to the private sector.

 

[notverydeep]

Also it would be a lot fairer if the third party insurance was included as part of the road tax as everyone would pay the same amount. Everyone with the same type of vehicle pays the same amount of road tax. The car insurance rates at the moment are ridiculous with people paying massively different amounts to each other. So if the third party insurance was included as part of the road tax than it would make the pricing a lot fairer.

This would essentially be nationalisation of the risk, where the current system charges those with characteristics identified as being more likely to cause an accident (many different attributes are included in their calculations) are charged more than others in groups identified as less likely - at least for a given vehicle model (which could still be used to discriminate risk level).

There is some precedent for this. Older people, people who consume large quantities of alcohol or engage in lots of impact sports are more likely to use health services than some other groups, but have equal access to these services (in economic terms it is essentially rationed by queuing). In relatively recent times, car insurers were obliged not to discriminate on the basis of gender, even though this was identified by them as a factor that does lead to different accident likelihoods. Whether people consider this nationalisation would be "fairer" or not will tend to correlate with how risky the insurance industry finds their characteristics to be at present...

 

[zero]

In Australia, as is typical with bureaucracy, things are more complicated than necessary with most car owners holding two insurance policies.

I don't know exactly how it works in all states/territories, but in NSW, QLD, ACT, SA, before you renew your rego (equivalent to car tax / VED in the UK) you must buy a compulsory third-party insurance policy from between 3 to 6 private insurers, which vary in each state but the government is involved.

The premiums are somewhat based on the address and government-held driving record of the person registering the car, but if the car is sold, the policy stays with the car, however there is a transfer tax based on the market value of the car so you can't transfer the name just to get a cheaper policy.

In VIC, WA, TAS and NT, the government is the compulsory third-party insurer and the premiums seem to be based on the address.

Separately, you have the choice of taking out a comprehensive, or fire/theft policy from any number of private insurers. Premiums are based on your claims history and statistical risk, but generally not on your personal driving history unless you have criminal convictions for driving badly. Unlike the UK, policies cover anybody driving the car, so you can freely lend your car to anybody with a licence but there is a higher excess for drivers who are not named on the policy. Also unlike the UK having a foreign licence does not necessarily increase the premium significantly, but if you own a car you can really only be on a foreign licence for 3 months anyway.

I believe the compulsory third party insurance only covers injuries to people. If your car is low value, it may not be worth paying to insure it, however the risk is that you are at fault for causing an accident and have to buy someone a new expensive car.


I have looked into the situation in Canada and it is also complex. Some provinces have a government-run insurer, while others have opened the market to private insurers. In BC, it seems that the government insurer is for-profit and competes with private insurers (and rather than using its profits to reduce future premiums it pays them to the government so indirectly benefiting all residents after government inefficiencies). Some provinces have a "no-fault" third-party insurance system and others have a "tort" system. In SK, the government insurer allows you to choose between the two.