A new insurance mechanism for luxury cars is necessary to protect common car owners from paying exorbitant compensation in case of accidents, says an article on people's.net. Excerpts:

Media reports say a woman driving a Honda Accord, which collided with a Rolls-Royce in Wenzhou, Zhejiang province, was forced to accept the responsibility for the accident and pay 390,000 yuan ($62,000) as compensation when her insurance ceiling for third party liability was only 200,000 yuan, which means she has to pay 190,000 yuan.

A public debate has started on what a person driving an ordinary car involved in an accident with a luxury vehicle is supposed to do to pay an unaffordable compensation.

Insurance companies are unwilling to grant special insurance coverage to luxury cars because the compensation is usually very high. This adds to common car owners' risk because they may have to pay sky-high compensation if they are involved in accidents with luxury cars.

The problem is how to share the risks on the road. For example, before World War II there were few cars in Japan, and thus a driver took great care while driving. But with the popularity of cars increasing, the law expanded the duty of pedestrians in 1955.

It's not possible to stop issuing license for luxury cars in China, but the government could establish a new compulsory insurance mechanism for traffic accidents involving luxury cars, which will make "guilty" drivers pay reasonable compensation with the insurance companies paying the rest. Also, insurance companies can collect premium from luxury car owners to share the risk.

(China Daily 02/16/2012 page9)