A hefty subsidy plan will be phased out.

Vehicle owners will pay more for compulsory auto liability insurance starting next fiscal year due to a three-year phaseout of government subsidies.

Both the Finance Ministry and the Ministry of Land, Infrastructure and Transport have agreed to phase out subsidies used to lower premium rates.

Therefore, starting next fiscal year, the premiums for two-year contracts covering ordinary passenger cars will rise by about 4,000 yen from the current 27,630 yen. In fiscal 2008, those premiums will be 5,840 yen higher.

The annual rates for taxis operating in Tokyo, Osaka and other large cities will increase by about 17,000 yen next fiscal year from the current 103,080 yen a year, and by about 25,000 yen in fiscal 2008.

Owners of trucks with load capacities of more than two tons will be required to pay about 10,000 yen more next fiscal year and 15,000 yen more in fiscal 2008 for their two-year contracts.

Both taxi and trucking companies are expected to be seriously affected by the planned premium hikes as they have large numbers of vehicles and it will be difficult for them to pass on the increased costs in their service fees, given the current intensifying price competition.

All vehicle owners are legally obliged to buy the liability insurance so that traffic-accident victims can be compensated.

Owners are required to pay the premiums when they buy their vehicles and subsequently every one or two years when their vehicles undergo mandatory inspections.

A transport ministry official said hikes in premiums will be unavoidable as there is no substitute for the subsidies that will be phased out.

The subsidies originally came from an investment of some of the premium funds, but the program was discontinued in fiscal 2001. The phaseout will deplete what was left of the investment returns.

An official of a casualty insurer said it will be impossible for the insurance companies to offset the loss of subsidies through cost-cutting efforts.(IHT/Asahi: December 23,2004)