Financing road safety from insurance and license fees
The worldwide statistics of death in 2015 is about 56.4 million. More than half (54%) were due to the top 10 causes. Ischaemic heart disease and stroke are the world's biggest killers, accounting for a combined 15 million deaths. Chronic obstructive pulmonary disease claimed 3.2 million lives, while lung cancer (along with trachea and bronchus cancers) caused 1.7 million deaths. Diabetes killed 1.6 million, Lower respiratory infections causing 3.2 million deaths worldwide.
HIV/AIDS is no longer among the world's top 10 causes of death, having killed 1.1 million and Road injuries killed 1.3 million people in 2015.Road traffic crashes rank as the 9th leading cause of death. Unless action is taken, road traffic injuries are predicted to become the fifth leading cause of death by 2030. Now the international community is taking commendable action to eliminate diseases such as TB and malaria.
The socio-economic costs of road crashes usually represent between 1% and 3% of a country's GDP due to loss of active manpower, medical expenses and resources losses. Many countries are unable to estimate the annual costs of road trauma to the nation. Some of the countries giving far lower priority in terms of resource allocation or recognition as a development priority. The available evidence suggests that costs substantially outweigh the funds put into road injury prevention programs.
The best option to face the challenge is prevention of road accident through road safety interventions including road safety engineering, ambulance and hospital services, training of driver and pedestrians and vehicle licensing, the testing of vehicles for roadworthiness, the enforcement of traffic laws and regulations by the police. The major source of fund is government and although the private sector for same cause and also for creating better business options.
Road safety interventions are normally regarded as a key responsibility of government and are financed through the budgets of concerned public sector agencies. The hospital service, the emergency ambulance services, the police and the school system all have a part to play and their spending will often exceed that incurred by the transport ministry and road authorities.
The major sources of funds include: (a) general tax revenues, (b) specific taxes usually traffic fines earmarked to support spending on road safety, (c) levies added to insurance premiums, (d) roaduser tax,(e) revenues earned from sale of surplus State highway property, (f) sponsorship by private businesses.
The revenue for these road funds typically comes from a levy added to the price of fuel, vehicle registration fees, vehicle license fees and direct road user charges (e.g., tolls and weight-distance fees).The items funded from the road fund vary considerably between countries.
Services charges and tax on driver licensing, vehicle inspection and operator licensing are directly funded from road user fees, paid either to the government agencies responsible to serve these citizens. Vietnam is the only country known to allocate all of its traffic fines to road safety. The earmarking of traffic fines for use of road safety is uncommon. In contrast The traffic police in Malaysia and the Philippines and Bangladesh earned a portion of traffic fines as commission.
This may cause un-necessary harassment of car users in Bangladesh. The traffic fines for traffic rule violators has got new dimension with installation of close circuit camera with traffic signals and speed limit control areas. In Western Australia, one-third of red light and speed control camera fines are paid into the Road Trauma Trust Fund, while speed camera trials are on-going in the UK with all revenues earmarked to provide additional speed cameras at hazardous locations.
The use of surcharges applied to vehicle licensing and registration fees appear popular in the US as a source of road safety funding, where they are used to help finance emergency medical services and/or the costs of the licensing agencies and training programmes. Insurance premiums are also used to support the Korea Traffic Safety Association. In Poland a special fund, derived from 1% of insurance revenue, has been set up to finance road safety projects.
The developing countries has problem of such sources since many of the vehicles are unlicensed and uninsured. The most important two sources of Motor vehicles tax and levy on insurance are lower than expected level. The levy on fuel is best alternate to collect tax on vehicle either registered or not. To reduce evasion, South Africa now collects its third party injury premiums through a fuel levy. Four other Southern African countries have adopted the same procedure and it is also being considered in Mauritius. Collecting the insurance levy through a fuel levy offers the added benefit of relating payments to exposure -- those vehicles which travel more pay more.
UK channelized various taxes and user charges and traffic fines revenue from speed cameras is earmarked for road safety intervention at hazardous locations. One of the best examples is Transfund in New Zealand. The first budget item of this fund, which is entirely financed by road user charges, is to support police in traffic law enforcement and the work of the Land Transport Safety Authority (LTSA). New Zealand has had a road fund since 1953. It has been restructured several times, most recently in 1996 when management of the road fund was transferred to an independent road fund administration called Transfund.
The road fund operates on the basis of "user pay." In other words, road users pay for usage of roads, the proceeds are managed outside the government's budget (i.e., it is as off budget accounts) and the funds are used to deliver "a safe and efficient state highway system".
New Zealand Road Safety to 2010 strategy formulate the policy for financing the national road safety enforcement programme, national road safety education, national publicity and awareness campaigns, national strategy management and coordination processes, national and local low-cost safety engineering measures, and general road network investments that contribute to improved road safety outcomes.
Many private businesses particularly insurance companies and vehicle related manufacturers can support road safety to benefit their corporate image, to develop new markets through demonstration projects, or to brand their products as safe. They may also benefit from the lower costs associated with fewer road crashes and safer driving practices.The funds are sometimes made available as cash, while at other times may invest in road safely such as promotion of awareness and re-construction/ modification of hazardous zones, road dividers etc.
First, the allocations for road works can include spending on engineering works designed to improve road safety (e.g., treating hazardous locations, undertaking road safety audits, etc.) while, second, the lead agency with responsibility for road safety (i.e., the transport ministry or National Road Safety Council, or equivalent) can apply for funds to finance a range non-engineering interventions (e.g., road safety publicity, driver training, schools programs, etc.).
the revenues for the road fund comes from: (i) a fuel excise added to the price of gasoline; (ii) weight-distance charges paid by diesel vehicles; (iii) motor vehicle registration fees; (iv) interest earned on the road fund account; (v) revenues earned from sale of surplus State highway property; and (vi) refund of GST (the NZ equivalent of VAT). The revenues are deposited into an interest bearing Treasury account to recognize that the road fund is a separate account.
In 1997, about 15 percent of overall revenues was transferred to the Land Transport Safety Authority (LTSA) to pay for the costs of police road safety enforcement (about 80 percent of the funds received go on this) and the costs of operating the LTSA (mainly educational and publicity programs). The balance of the revenue was transferred to Transfund.
A small amount of the funds received by Transfund is channeled to support passenger transport (about 4 percent of revenues in 1997), while the remainder is used to support road spending under the jurisdiction of Transit New Zealand (national roads) and local governments. Among other things, these funds are used to finance the costs of the road safety engineering measures (e.g., skid resistance, treatment of hazardous locations, etc.) which help to improve road safety.
Over 40 years, Finland is believed to have been the first country which used insurance premiums to finance road safety. Set at a nominal amount (1% of premiums), it has been reported to raise $8 million per year for education and publicity campaigns as per study in 1998. The Finnish insurance system has premiums set by the Ministry of Social Affairs, unlike in the UK where the insurance companies adjust premiums to reflect liability cost. The insurance industry impose higher premiums on risky motor drivers on their accident records and government may also impose additional tax on drivers with reckless driving records.
The quantity of national road safety investment in different countries are not readily identifiable, because many safety related expenditures are embedded in broader categories of expenditure across the transport, health, justice and education sectors.
Many countries have proper socio-economic cost and benefit analysis of road crashes and the true value of preventing deaths and serious injuries and invest substantial amount for prevention of road crush. They calculate the tax policy to discourage accident (high tax on the basis of history of driving) and encourage the transport related companies (insurance) to invest in road accident prevention programs. The efficient system can reduce accident, relative tax on service recipients and other stakeholders. Bangladesh has no such plan and program to prevent the road accident as such.
The writer is a Legal Economist. E-mail: email@example.com