Should third party insurance be compulsory for bicycles?

In recent media there has been a lot of talk regarding a compulsory third party insurance scheme for bike riders. At times it has come from surprising sources such as Mayor Jock Barker from the Town of Claremont. Such dramatic calls need to be supported with factual information rather than an emotional knee jerk response.

For the record WestCycle supports the fact that riders should be insured, both for personal accident and third party. In fact cycling organisations financially benefit from people having insurance. The part we disagree with is the ‘compulsory’ part. It fails to consider the facts and understand the outcomes of such a decision.

The calls for compulsory third party insurance are based on a desire for pedestrians to be able to claim in the case of being hit by a cyclist. In order to assess the merits of a compulsory scheme we need to understand the risk. A pedestrian is far more likely to be killed by a range of things other than a bicycle. For example:

Twice as likely to be struck and killed by lightning*

23 times more likely to trip on a path and be killed*

700 times more likely to be killed by a motor vehicle whilst being a pedestrian*

Recently on a radio interview with the ABC, Mr Harold Scruby, CEO of the Pedestrian Council of Australia, made comment that he would like to see people off bicycles due to the threat they present to pedestrians. Consider for a moment that you are 700 times more likely to be killed by a car than a bike and you would expect Mr Scruby to be advocating for measures to protect pedestrians from motorists. This example clearly highlights the emotional calls that are forgetting the factual information. Unfortunately, it’s the emotional arguments that get the media attention.

There are three key points to be considered with a compulsory third party insurance scheme:

How many riders have 3 rd insurance at the moment? What’s the cost of the scheme versus the benefit? What are the broader community impacts of it?

Who is already covered?

If you are a member of a cycling organisation, which has insurance included, then you will have third party insurance. Thousands of riders in Western Australia are members of organisations such as Bicycling Western Australia, Mountain Bike Australia or Cycling Australia and therefore have the insurance. For those that aren’t (and we wish you were), most home and contents policies include public liability coverage. We did a scan of a range of common Home and Contents Policies to ascertain which ones included the cover, below is a snapshot. Based on this we are going to make the assumption that the majority of people riding bikes have the 3rd party insurance that people are currently calling to become compulsory.

Insurer Cover $ 3rd Party Injury 3rd Party Property RAC $20,000,000 ✔ ✔ AAMI $20,000,000 ✔ ✔ SGIO $20,000,000 ✔ ✔ Allianz $20,000,000 ✔ ✔ Budget Direct $20,000,000 ✔ ✔ Virgin Money $20,000,000 ✔ ✔ Real Insurance $20,000,000 ✔ ✔ Woolworths $20,000,000 ✔ ✔ Australia Post $20,000,000 ✔ ✔ Youi $20,000,000 ✔ ✔ HBF $20,000,000 ✔ ✔

*This is provided only has a guide, please check with your insurance company before relying on this information

What is the cost of a compulsory scheme?

Let’s consider the administration of the scheme. To be upfront the estimates used are only estimates designed not to be definitive but to paint a picture.

Considering the ratio of bikes to cars (1.4 million bikes vs 2.2 million cars) you could assume that you need an incremental 50% of the administration of the existing motor vehicle scheme. At a guess let’s say that represents an additional 1,000 people to administer and police the scheme – there are 1.4 million bikes to keep track of after all. In addition, you would need computers, office space, stationary, uniforms, training and everything else that comes with managing the program. Let’s assume the total annual cost of managing the scheme is $100,000,000 per annum – and that is just to administer it.

The current cost of the motor vehicle compulsory third party scheme in Western Australia is based on the vehicle class and the claims history of each class. The cost of the annual third-party insurance on a vehicle is:

Taxi within the CBD area – $1,565.50

Motor car – $420.85

Motorcycle – $282.70

Forklift – $71.90

Trailer/Caravan – $14.30

In 2017 the Insurance Commission of Western Australia paid pedestrians $123 million of claims. Given you are more than 700 times more likely to be killed by a motor vehicle than a bicycle it is safe to assume the pool of money required for a compulsory third party scheme on bicycles is one 700th of the current level of paid claims to pedestrians. We would therefore need a pool of approximately $200,000 per year to cover the potential claims. To avoid the wrath of detractors let’s base our assessment on a figure two and a half times more than that to be safe – $500,000 per year.

There are approximately 1.4 million bikes in the state so each bike would need to pay $2.40 per bike to generate the $500,000 claims pool.

A scheme that costs $100,000,000 to generate $500,000 is nothing short of ridiculous. No one in their right mind would even consider it.

How would the community be impacted?

Putting barriers in place that will reduce the number of people cycling is not in the interest of the community. Making bikes hold compulsory insurance will have a significant impact on the number of people riding bikes. Take the 5-year-old child, the person who rides 500metres to the train station or the family who only ride whilst on holidays – now they need to go and get their bike registered because it’s compulsory to hold third party insurance. Make no mistake this will have a dramatic and drastic impact on the number of people riding a bike. That means school drop offs will take a lot longer, our freeways will be even more congested, cost of building and maintaining our road network will skyrocket, our CO2 emissions will increase and pressure will be placed on our health system as the health of the community is impacted.

Research shows that the economy saves $1.42 for every kilometre ridden by a cyclist. 500,000 people ride every week in Western Australia. As a guestimate let’s say they ride 50km per person on average. Yes, there will be some doing 500 kilometres and some only 5 but a 50km average will help us paint the picture. That is close to $2 billion dollars a year that our economy benefits from people riding bikes.

If a compulsory third party insurance scheme was put in place it is safe to say 10% of people riding would stop. If that eventuates the cost to our economy is $200,000,000 per annum.

An administration cost of $100,000,000 plus the economic impact to the economy of $200,000,000 all to generate a pool of $500,000 for the 3rd party insurance scheme. You would need to be extremely foolish to even consider a scheme that cost 300 million dollars a year to generate just $500,000.

A $300,000,000 cost to generate the $500,000 required for an insurance scheme. It just doesn’t make any sense.

Let’s move on from the debate on a compulsory 3rd party insurance scheme which is emotionally based and talk about matters that are actually relevant in our community.

*Grzebieta, R.H., McIntosh, A.M., & Chong, S. (2011). Pedestrian-Cyclist Collisions: Issues and Risk. Australasian College of Road Safety Conference ”

A Safe System: Making it Happen!”, Melbourne 1-2 September 2011