Benefits of mandatory cover
Mandatory third-party vehicle insurance will lower the cost of cover for South African consumers and could also reduce the number of road accidents, since it will bring down the number of damaged vehicles on our roads, says John Melville, head of risk services at Santam.
“In South Africa, 65 percent of vehicles are not insured. Unlike many other countries, we also have no compulsory thirdparty damage insurance, which means that third parties – who are not at fault in an accident – typically cannot recover their damages and either have to pay for repairs themselves or, if they are insured, claim the additional expense from their insurer,” Melville says.
He says this means that South African insurers pay out more in claims per policyholder than in countries where all drivers are obliged to have third-party insurance, and are thus able to cover any damage they may cause. This has pushed up the cost of motor insurance, making it less affordable for low- and middleincome car owners.
“A situation where 35 percent of drivers are, in effect, subsidising the rest is clearly not a sustainable model in the long run. Rising costs may also lead to the number of insured drivers decreasing,” Melville says.
According to South African Insurance Association (SAIA) statistics, 10 years ago two-thirds of motor insurance claims were related to theft or hijacking. Today, more than 70 percent of claims are for accident damage.
“By introducing compulsory thirdparty motor insurance, the cost burden would be spread across a much larger pool of drivers, which will bring down the cost of insurance. Uninsured persons – who will also pay a small premium for third party cover – will be protected from protracted law suits and potential financial ruin if they cause damage to an expensive vehicle,” Mellville says.
He says that, if everyone is insured, there will be funds available to repair more vehicles after accidents, which will reduce the number of damaged vehicles on our roads and therefore improve road safety. “Despite the best intentions of our law enforcement agencies, it is impossible to keep damaged vehicles off our roads in situations where their owners critically need transport, but since they aren’t insured, cannot repair their vehicles properly after an accident,” he says.
Since 2011, SAIA has lobbied for the introduction of mandatory thirdparty vehicle cover. “Santam, which manages more than 20 000 motorrelated claims a month, fully supports this proposal. It will certainly be a strong step towards a more sustainable model in the motor insurance landscape in South Africa, to the benefit of insurers, but most of all, consumers.
“The implementation of such a solution will only be effective, however, if it is enforced through an appropriate legislative framework, such as the legislation for third-party bodily injury cover provided for through the Road Accident Fund,” Melville says.