Why Your Vehicle Registrations Keeps Rising Every Year

As a vehicle owner, I’ve noticed that the registration and insurance costs of a vehicle keeps rising every year. Now, like many citizens I’ve often wondered why this is happening. I’ve often suspected that it was a way for the government to make money. However, I recently came to understand why, and I’d like to drop some of that knowledge here.

Now, I am in Papua New Guinea (PNG) and the examples I give apply here. But the general concept applies to all vehicle or car insurance policies.

Vehicle Registration

Vehicle registration is compulsory for vehicle owners to be able to legally drive their vehicles on public roads. Unfortunately, the PNG registration process includes a compulsory third party insurance payment. This essentially means that your insurance and registration are tied together.

So going forward, you should think of your vehicle registration as your third party insurance. This should help you understand why it keeps rising every year.

How Insurance is Calculated

Insurance is generally calculated against risk. The higher the risk, the higher the insurance – and the risk factors dictate the insurance premium.

In third party insurers like MVIL, the cost is determined by the types of vehicles and the probability of those vehicles getting into accidents. The more accidents these vehicles are involved in, the higher the premium.

For example, last year my 1994 Toyota Hilux double cab utility cost approximately PGK1,200 for registration and insurance. This year, it has risen by about PGK100 (PGK1,300).

This rise in premium can be attributed to two things:

1. The increase in the number of utility vehicles on the road, and;
2. The number of accidents that these class of vehicles have been involved in the last year.

These two attributes are directly related as the probability of accidents increase with the increase of vehicles. The more vehicles on the road mean and higher chance of accidents.

Now, there are also other factors that can affect your premium like the size of the vehicle and engine, the weight and the type of purpose you would use it for.

Higher, Higher, Higher!

So in short, the higher the type of vehicles on the road, the higher the chances of an accident and the higher the premium.

Anyway, I hope I have helped you understand why vehicle registration costs seem to rise every year.