Guiding consumers since 2009

Call for compulsory third party insurance should be welcomed

By Staff Writer

 The Short-Term Insurance Ombudsman’s “urgent” call for the introduction of compulsory third party motor insurance in South Africa should be welcomed by all parties involved, as motorists who do insure their vehicles are in effect overpaying on their premium by having to subsidise those who do not pay.

This is according to Christelle Fourie, Managing Director of MUA Insurance Acceptances, who says she supports the move, as an increase in the number of vehicles insured on the roads should also translate into a reduction in the cost of motor insurance for motorists.

“If the insurance industry has a bigger pool of premium contributions; ultimately what this means is that lower premiums and excesses will be passed on to consumers, as the losses of the few will be compensated by the contributions of the many.”

Fourie says the idea of establishing a compulsory insurance body is particularly crucial in a country such as South Africa, where few motorists currently insure their vehicles.

“Compulsory insurance is also critical for the motor industry as it will ensure an element of stability, allowing more repairs to be carried out, with the result that more of the vehicles on the road will be in an acceptable and roadworthy condition.”

Research from the South African Insurance Association (SAIA), which is currently in consultation with the government on the issue of compulsory third party insurance, has shown that the number of uninsured vehicles on the roads is around 70%.

Fourie says that while a compulsory third party insurance scheme is still under consideration, people should be aware that there are likely to be limits imposed on costs that can be recouped. “It is highly likely that the maximum amount paid out for repairs may be capped, still leaving those innocent parties with additional repair costs for their own account. However any guilty party will still carry all their own costs.”

She says that while South Africa may have to establish its own unique model to ensure any scheme is workable, the country should also look internationally for similar examples. In the UK, new powers introduced earlier this year mean that it is also now an offence to keep an uninsured vehicle, rather than to drive when uninsured. Records at the Motor Insurance Database (MID) will now be compared with those held on the DVLA Vehicle Database in order to indentify owners of uninsured vehicles and fine them.

“One of the biggest problems in establishing a workable compulsory insurance scheme will be how to fund it adequately. This requires a lot of thought and research, especially by actuaries involved in calculating average costs of claims and thus a reasonable annual premium to fund these.”

She says a decision on how to collect payments for compulsory insurance will also need to be addressed, as the insurance is likely to be attached to the vehicle itself rather than the owner.

Fourie says one of the suggestions currently being debated is that the insurance levy may be collected when the license disc is renewed. “This makes sense in terms of ease of legislating and collecting the payment, however, this could prove problematic if the annual premium is quite high.”

Recent Articles

Featured Travel ban – how to claim for the loss incurred

As with the recent Covid-19 pandemic, governments sometimes issue travel bans to prevent people from travelling to other countries. This becomes even more complicated if you’ve already planned and paid for your trip. Your flights will be cancelled, and you may lose money from cancelled accommodation arrangements. How do you claim for the financial losses incurred due to a travel ban?

How to finance and insure a second-hand vehicle

Buying a second-hand vehicle may suit your budget better than acquiring a new one. But what impact does an older model have on vehicle finance and car insurance? We reached out to specialists in the field to explain what the financial implications are of pursuing a second-hand vehicle.

Reading your loan agreement: look out for this

Many people don’t read their loan agreements. They just sign on the dotted line without realising that they could be signing their lives away. But it’s important to review your loan agreement before and after taking your loan to avoid future setbacks.

 

Part 1: The difference between good and bad debt

In the first part of our Debt-ucate series we explore the difference between good and bad debt and why debt is, in fact, necessary.

Deals

Udemy online course for R180

Price: R180
When: Until 27 March 2020
Where: Online

Educate your kids for free with Skills Share

Price: Free
When: Daily
Where: Online

Take advantage of payment holidays from Standard Bank and Nedbank

Price: Free
When: From 1 April to 30 June 2020
Where: Nationwide