Jason Govan, 26, died and wife Rhiannon suffered serious injuries when their car collided with the car of a man driving in the wrong direction on the Princes Freeway, outside Morwell, about 9.15am on January 21, 2012.

The 42-year-old driver of the other car, who cannot be named, also died. Police had called off their pursuit of him just minutes earlier.

Police had pursued the driver through Morwell for two minutes and 19 seconds, the Coroners Court heard on Thursday, until he drove onto the freeway via the exit ramp. Investigators estimated he was driving at 154km/h when the cars collided about 1.2 kilometres away.

Coroner John Olle said pursuing police should have taken a more "prudent and cautious" approach by calling off their chase when the driver ran a red light, as by the time he took the exit ramp it was clear he would not stop.

Victoria Police in July changed its policy to not pursue fleeing drivers, or do so only in the most extreme cases.

That change followed recommendations Mr Olle made last year over the 2006 death of Sarah Booth, 17, who was killed when the car in which she was a passenger crashed in Carrum Downs following a police pursuit. The driver was later jailed for culpable driving.

Mr Olle referred to those recommendations on Thursday, when he reinforced his view police shouldn't pursue drivers just because they were fleeing.

"I note that if these changes had been in place at the time of this (Morwell) incident, a pursuit would not have been conducted," he said.

Peter Norden, an adjunct professor with RMIT University and speaking on behalf of the driver's family, said outside court Mr Olle's findings were a victory for public safety and common sense.

"The coroner's findings today reinforce the importance that the No.1 duty of Victorian police officers is the protection of the community safety and the upholding of public health," he said.

Professor Norden said 13 people had died on Victorian roads in police pursuits in the past five years.

He said the driver's family wanted all states to ensure they had adopted similar recommendations to Victoria. NSW police, for example, are still considering whether to follow suit.

The inquest heard the driver had a long history of mental health problems, and was known to police in Morwell.

But he was not obliged to undergo mental health treatment after being released from prison in August 2011, because there was no parole in place when the Court of Appeal reduced his sentence.

The driver visited Latrobe Mental Health Services several times in the months before the crash, including two days prior, when he was seen looking agitated in his car beside the road.

He was released the same day, the court heard, and Mr Olle said the decisions by staff to do so and devise a future crisis management plan for him were both reasonable and appropriate.

The court heard the pursuing police were unable to identify the driver while in pursuit, as they did not have a data terminal in their divisional van.