Fewer than 1 in 3 cars in South Africa is insured, at least that’s what we know of.
There is also a large number of unlicenced and “ghost” cars in the country – which are vehicles using the roads every day that are not being kept track of by the authorities and add to the share of uninsured drivers, said Christelle Colman, CEO and founder of Ami Underwriting Managers.
Due to the large portion of uninsured vehicles and motorists with fraudulent licences, the prevalence of drivers under the influence of drugs or alcohol, poorly-maintained roads, and “bribe-friendly” police officers, the average insured driver in South Africa functions in a “very high-risk landscape” which already makes premiums more substantial than what could’ve been.
Combined with the high rate of deadly accidents in the country, there’s a good chance that at least one of the cars involved in a crash is not covered, which will require the other party to claim from their insurer whether they were at fault or not, which in turn pushes up their monthly premiums and excesses even further.
Colman is therefore advocating that South Africa instates a law requiring individuals to have insurance before they are allowed to take home a new car.
“If you renew your vehicle licence in any other country around the world, even our neighbours, you have to prove that you’ve got insurance for that year. We don’t have that,” Colman said during an interview on 702’s The Money Show.
There is no law in South Africa that requires car buyers to have car insurance, she said.
The country used to have compulsory third-party insurance for bodily injury which later turned into the Road Accident Fund (RAF); the property damage aspect of vehicle collisions is not covered by this, however.
A significant reduction in premiums
The benefit to having compulsory insurance is that if another driver crashes into you at no fault of your own, you won’t have to claim from your insurance to pay for the damages.
Frequently claiming from your insurer pushes up your monthly premium, the excess payable when you get into another accident, and it could make it difficult to get insurance again if you have to get a new car.
“The pool insurance from which all these claims are paid is relatively small in the South African market, so those people who actually take insurance end up paying much higher premiums,” said Colman.
“It makes more financial sense for everyone to have comprehensive motor insurance or at the very least third-party insurance.”
She said we will “definitely see” a reduction in premiums if the number of insured motorists increased.
Keyword: Fewer than 1 in 3 cars in South Africa are insured – and they’re paying more than they should