CAR INSURANCE - Compulsory Third-Party Car Insurance

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Compulsory third-party car insurance for South Africa

Friday, 30 July 2010 11:35

The South African Insurance Association (SAIA) has been contemplating the future of short-term insurance, specifically auto insurance. Given that between 65 and 70 percent of vehicles on South African roads are uninsured (roughly 9.4 million vehicles), short-term insurers risk running at a loss, thus threatening the longevity of the car insurance industry.

If uninsured motor vehicles are involved in an accident with an insured vehicle, the auto insurance provider pays out for damages incurred by the uninsured with very little chance of recovering the money. The only way to counter this is to put up insurance prices to offset the loss.

As a result of this, the SAIA has been in talks with the Department of Transport to draft a bill that makes third-party car insurance compulsory for all drivers on South African roads. This sort of insurance is already in place in some countries, such as the United States. Before this can go ahead into the drafting stage, the Department of Transport must take into account the financial status of vehicle owners and the existing fuel levy, said Transport Minister Sibusiso Ndebele to Business Day newspaper in June.

The insurance that the government is considering is not for personal injury or death, covered by the Road Accident Fund which is paid for as a part of the fuel levy. The compulsory insurance refers to damage to vehicles–one of the highest costs of insurers, compounded by the increasing costs to repair vehicles.

The government is yet to consult private stakeholders in the insurance industry before going ahead with the bill.

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