Funding Road Safety

  1. last year

    Sangpa Tamang

    29 Mar 2016 Administrator
    Edited last year by Sangpa Tamang

    Apart from the humanitarian aspects of road safety, the injuries and fatalities which occur as a result of road accidents have serious implications in both social and economic terms. Many accident victims have others dependent upon them. Absence from work and/or the family can have far-reaching effects well beyond the immediate costs of the treatment and repair which may be needed and other monetary costs of the accident.

    The second largest cause of deaths for the core age groups (ages 4-55 years) in many countries is road accidents. Despite this very little or no attention is given to road safety measures to prevent road accidents mainly because of lack of funds. The insurance industry role is limited to the post-accident stage while vast sums are spent on accident claim compensation.

    While the vehicle numbers keep rising along with road accidents, very little thought or financing is directed at road accident prevention.

    Therefore, how to fund road safety is a critical issue. Prevention is always better than cure!

  2. Sangpa Tamang

    29 Mar 2016 Administrator

    An Example of Funding Road Safety

    In Fiji, motor insurance is provided by only five or six insurance companies. Amounts that can be charged for third party insurance are controlled and have to be approved by the Commissioner of Insurance. Companies engaging in motor insurance business have to present information annually to the Commissioner on premiums received, policies issued, and claims paid. Whenever any requests are made for third party insurance premiums to be increased, discussions are held between the insurance underwriters and the Commissioner to agree any changes. The Commissioner’s role is to regulate the industry and to look after the public interest.

    In 1992, as part of efforts to establish an National Road Safety Commission (NRSC), discussions were held with the insurance industry and Commissioner of Insurance. Agreement was reached that as part of the next review of premiums, a “voluntary” levy of about 10 percent of third party motor insurance premiums would be passed over to the proposed NRSC.

    The Fiji NRSC, once established, therefore had a steady stream of income (paid quarterly into the NRSC account by each insurance company depending upon the number of third party motor insurance premiums received). The insurance companies have been permitted to have a representative on the NRSC and in this case, that person actually is chairman of the NRSC finance subcommittee.

    The income from the insurance companies provides about 60 percent of NRSC annual income, with a further 10 percent being received from government (via services and facilities provided to NRSC headquarters). A further 30 percent is raised by the NRSC from commercial sponsorship (vehicle dealers, oil companies, and banks) and from fund raising.

    This solution thus provides a guaranteed and growing (because funds increase in line with the increase in numbers of vehicles) source of funds for NRSC activity while still requiring the NRSC to actively seek further funding or sponsorship from the commercial sector. This reduces reliance on government grants or funding, which can, in some countries, be erratic and unreliable.

    All parties involved benefit from the arrangement and it becomes in everyone’s interest to ensure all motorists have at least third party insurance. The NRSC is able to carry out effective safety initiatives and interventions, which in association with other activities undertaken as part of the ADB/World Bank funded Road Safety Action Plan, had by mid April resulted in a reduction in road accidents deaths of more than 23 percent against deaths in 1991, the year immediately before the Road Safety Action Plan commenced.

    Source: ADB Road Safety Guidelines for the Asian and Pacific Region


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