An insurance based approach to safer road use

A challenge in achieving safer road use is that the financial incentives for drivers and their insurers for safer road use are significantly lower than the benefits; that is, the financial consequences of a road crash fatality, and to an extent serious injury, are far less than the economic benefits of prevention. This paper explores policy changes to address this imbalance. An insurance based solution is examined whereby insurers are given optimal incentives to encourage safer road use and related decisions. This alternative is examined in light of technology and social trends, behavioural biases of road users and the legal and policy environment. Such a solution could be efficient and effective, be cost reducing and lead to safer road use among all road users. There are a number of issues for consideration but none appear insurmountable. There is a need to reform existing insurance schemes to facilitate usage-based insurance pricing to improve road-safety. Now that technology enables monitoring of safe driving, the current arrangements have the effect of taxing safer driving and subsidising un-safe driving.