Do like Zim­babwe does

CHRIS BARRY ex­plains why SA driv­ers must have third-party in­sur­ance

The Witness - Wheels - - MOTORING - • Chris Barry is the MD of HCV In­sur­ance.

WITH ve­hi­cle in­sur­ance not be­ing com­pul­sory in South Africa, ex­perts es­ti­mate that only 30% to 40% of ve­hi­cles on the road are cov­ered, making all driv­ers vul­ner­a­ble to the costly con­se­quences of an accident.

It’s time for the South African gov­ern­ment to set up a state-run com­pul­sory third-party in­sur­ance ve­hi­cle, run along the same lines as Sas­ria in­sur­ance. This to pro­tect cit­i­zens from the con­se­quences of an accident with an unin­sured ve­hi­cle, in par­tic­u­lar to cover the costly af­ter­math of an accident not cov­ered by the Road Accident Fund (RAF).

While in­juries to your per­son are cov­ered by the RAF, dam­age to a ve­hi­cle is not — and if an unin­sured or un­der­in­sured driver has an accident with an­other ve­hi­cle, they would be li­able for the costs in­curred in that accident.

How many unin­sured or un­der­in­sured South Africans have the money ly­ing around to pay for re­pairs to dam­age caused by an accident — even a bumper bash­ing? Not many, I’m sure you’ll agree.

If we were to look for a lo­cally rel­e­vant model on which to base this third-party in­sur­ance provider, Sas­ria would be a good ref­er­ence point.

It is one of the state-owned en­ter­prises (SOE) that has a good story to tell, with its re­sults for the last year in­clud­ing an un­der­writ­ing sur­plus or R468 mil­lion, a net profit be­fore tax of R834 mil­lion, and gross writ­ten pre­mi­ums of R1,5 bil­lion.

The div­i­dend paid to the state was R206 mil­lion, an in­crease of nearly R100 mil­lion from the pre­vi­ous year.

Fi­nance Min­is­ter Nhlanhla Nene has gone so far as to praise Sas­ria as one of South Africa’s top-per­form­ing SOEs.

Ob­vi­ously, this state-run third-party in­sur­ance would need to be funded from some­where, and there would al­ways be the ar­gu­ment that South Africa’s driv­ers can­not af­ford even more costs to be added to their li­cens­ing fees or to the over­all fuel price. I would ar­gue that South Africans sim­ply can­not af­ford to NOT be cov­ered by third-party in­sur­ance.

Neigh­bour­ing coun­tries such as Zim­babwe have seen the wis­dom of in­sti­tut­ing com­pul­sory third party in­sur­ance, with Zim­babwe charg­ing road users the equiv­a­lent of R550 per an­num per car, R990 per an­num per truck, and R330 per an­num per trailer. With around 9,2 mil­lion cars and light de­liv­ery ve­hi­cles, 365 000 trucks and 183 000 trail­ers on South African roads, that amounts to a min­i­mum an­nual in­come of nearly R5,4 bil­lion.

If gov­ern­ment were to set up a third-party in­sur­ance SOE run on the same lines as Sas­ria, the or­gan­i­sa­tion could turn to short­term in­sur­ance com­pa­nies to col­lect an­nual fees, in re­turn for a small com­mis­sion for the ad­min­is­tra­tion and col­lec­tion of pre­mi­ums. The in­surer would be self­man­aged, and would set­tle claims di­rectly with claimants, keep­ing op­er­at­ing ex­penses to a min­i­mum.

If the state was ei­ther a li­cence car­rier or a share­holder, we could as­sume an un­der­writ­ing mar­gin of 10%, yield­ing a R540 mil­lion mar­gin, and if we were to as­sume a 20% un­der­writ­ing sur­plus, that would re­sult in more than R1 bil­lion sur­plus … if the third­party in­sur­ance SOE was run on the same prin­ci­ples as Sas­ria.

In­tro­duc­ing this in­sur­ance would also be an op­por­tu­nity to re­duce the num­ber of unin­sured ve­hi­cles on South African roads.

A third party cover of about 10%, it would make a sig­nif­i­cant dent in the more than R350 bil­lion that ac­ci­dents cost the coun­try each year.

The “tem­plate” is there, so to speak.

Now all that we need is po­lit­i­cal will and leg­isla­tive ac­tion to cre­ate a body that will truly make a dif­fer­ence in the lives of the many South Africans af­fected by our coun­try’s ap­palling road accident sta­tis­tics.

PHOTO: ROAD SAFETY

Es­ti­mates are fewer than half of the cars on South Africa’s roads are in­sured, leav­ing peo­ple un­able to pay for dam­ages.

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