July 3, 2019
For many years, the short-term car insurance industry, amongst others, has been waiting for the implementation of compulsory third party car insurance for South African motorists. Its absence has placed an additional financial burden on this industry and insured motorists. What is the latest progress on compulsory car insurance?
Please regard this article as information only. Car insurance is not a straightforward business, and if you are considering purchasing a car insurance product, please consult a registered financial advisor for professional advice.
Unfortunately, there has been no news of any recent developments. Perhaps those facts speak for themselves. Let us briefly examine the background.
The car insurance industry has to carry a massive financial burden, which is also shared by insured motorists. This is because only 30-35%, or more than 4 million, of all motorists in South Africa, are insured. 1 Thus, when one of the remaining 65-70%, or one of about 8 million, motorists cause an accident with one of the 30-35% insured, what happens? It is the latter that bears the brunt of it, and has to send in a claim every time.
Many insurance companies battle to obtain funds from uninsured motorists, and in the end have to pay for the claim themselves. 2
Because the industry is faced with additional claims, which it would not have had to pay out had compulsory third party car insurance been in place, this impacts premium increases. This, in turn, may negatively affect existing clients, 2 and so the knock-on effect is clearly evident.
If every motorist was compelled by law to buy third party car insurance, the financial burden of insurance claims would be carried fairly by all.2 At the moment, third party cover can be purchased from several car insurers.
Currently, third party car insurance is compulsory in Zimbabwe, 3,4 and Mozambique. 4 Compulsory third party insurance does not appear to be compulsory for Lesotho, Swaziland, and Namibia. 5
From the Internet, there currently appears to be no progress regarding compulsory third party car insurance. Is it possible that the South African Insurance Association (SAIA) could finalise matters with the Government, and, together with all the other role players, work out a solution?
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July 6, 2019