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Car insurance in SA: 'A necessity, not a luxury'

2016-06-21 11:20

IS YOUR CAR INSURED? The Automobile Association reports that about 70% of the 11.4 million registered cars in SA are not insured.Image: iStock

Cape Town - A frightening statistic of South Africa’s roads is that between 65 and 70% of the 11.4 million registered cars in the country are not insured, reports the Automobile Association.

It’s a situation the majority of motorists need to take heed of, and address urgently says the AA.

The association said a surprising number of motorists underestimate the negative consequences of being uninsured, assuming that it will never happen to them. 

Horror scenario

Consider that you are driving on a four-lane highway with three cars ahead of you, four behind you, and one on either side of you. If you are uninsured, five or six of these cars will also be uninsured. If you are involved in a crash with one of them, chances are neither of you will be able to afford the resulting expenses.  

The AA said: “Paying for repairs and recovering costs after a crash can be a slow, painful, and expensive process. This will potentially leave you without transport, or reliant on public transport where it is available, meaning your crash, and the result of you being uninsured, will impact on your life in significant ways.”

READ: How to choose the right car insurance in SA

Top 10 car insurance questions

Short-term insurance claims are decreasing, according to the latest annual report by the Ombudsman for Short-term Insurance. According to the 2015 report the number of complaints against insurance providers have decreased considerably in five years. It also shows that claims are being settled a lot quicker: the 2015 statistics reveal that it took an average of 74 days to settle disputes compared to 223 days in 2011.
To avoid nasty surprises when claiming for vehicle insurance it's critical you re-read your policy.

Read the vehicle section on your policy and ask the following: 
1 Does your policy include hail damage? 
2 Is the driving of your vehicle restricted to a "named" driver? 
3 Is cover for theft or hijacking subject to the installation of an immobiliser or tracking device? 
4 Are business use extensions included in car and household insurance? 
5 What territorial limits are applicable? 
6 Are penalties imposed for young drivers? 
7 What excesses apply in the event of loss or damage? 
8 Are you covered for loss/damage from mining operations, landslip or subsidence? 
9 Is there provision for car hire? 
10 What other value-added benefits are there?

READ: Industry leaders - SA car insurance in crisis

Insurance crisis

Seamus Casserly, director of First Equity risk management, believes we have a serious issue in the motor industry that needs discussion. Casserly said: "50% of premiums in the country are for motor insurance, while only 35% of the vehicles currently on the road are insured."

The situation is not sustainable and can degenerate quickly when considering the severity of the cost pressures.

Culture of impunity 

The levers at play range from the high cost of insurance, vehicle and car parts and the exorbitant cost of post-accident vehicle recovery and repair – these, according to experts, are underpinned by lawlessness and the culture of impunity on our roads.

John Melville, executive head of risk services at Santam, said: “We have a vehicle repair model where imported parts play a huge role and that is putting insurers’ margins under pressure, having seen the rand depreciate by more than 60% in the last three to four years. We replace, we don’t repair."

Casserly said: “Post-crash vehicle removal is another festering sore. 40% of the average R20 000 claim goes to the cost of getting the vehicle from the site of the accident to the repairer.” 

Unroadworthy cars

A further problem, the AA said, was that up to 800 000 vehicles in South Africa are either unregistered or classified as unroadworthy, meaning the possibility of being involved in a crash with an uninsured car is even higher.

READ: Car insurance excess - All you need to know

The AA said: “It is unlikely that these 800 000 cars are insured given that their owners are not even registering or looking after them. These cars potentially pose a bigger threat to you as they are unsafe because they are unroadworthy.

"What would happen if you are involved in a crash with one of these vehicles and your car suffers substantial damages? Who is going to foot the bill if you aren’t covered? This is a double blow because you may end up having to pay the installments on a vehicle you no longer use, while at the same time find ways to fund another mode of transport. In today’s tough economic climate, this may be financially crippling.

“Some people may argue that the costs of insurance are simply too high. Our view is that the costs of non-insurance are higher, and that failing to properly insure your vehicle places you at a greater financial risk. We understand that times are tough, but we also know that motorists need to cover themselves adequately.” 


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