Compulsory third-party insurance: what it could mean for motorists

2010-07-15 09:19

If you have car insurance, consider yourself lucky – and hope that,

should you ever be involved in an accident, the next person is one of the 35% of

South Africans who are also insured.

According to the Automobile Association (AA) of South Africa,

approximately 65% of motorists do not have car insurance.

The AA has been stressing the necessity of third party insurance to

ease damages incurred by vehicle crashes for some time.

Transport Minister S’bu Ndebele recently replied to a parliamentary

question that government was looking into

compulsory third-party insurance for motorists but it would require

careful consideration.

Ndebele said the department would first have to draw up a strategy

which would take into account the financial status of vehicle owners and the

existing fuel levy.

AA head of public affairs Gary Ronald said: “We would first need to

accumulate a fund to pay out third-party claims, a fund which at this stage does

not exist.

“There then begs the question of where this fund would originate,

from the government or from commercial industry bodies? If all motorists were to

pay a compulsory fee of say R50 per month, of the 960 000 crashes we have per

year, the fund would be bankrupt before we began, hence the need for seed

capital to the fund to make third-party payouts viable.”

Ronald added that the South African insurance association is doing

research into how compulsory third-party insurance could be initiated.

This inevitably means motorists who don’t have insurance might face

a dilemma with the monthly budget – they will have to fork out money for

premiums they could not afford in the first place.

It also means the 35% of motorists who do have insurance will have

to pay extra.

Managing director for, Rob Handfield-Jones, said

compulsory third-party insurance is an excellent idea which has been in force

for generations in the United Kingdom and United States of America.

Handfield-Jones said: “By forcing everyone to have it, the overall

cost of premiums will drop, which will make it more affordable too.

“Currently, only 35% of vehicles are insured, so there would be a

huge financial and cost benefit to spreading the net wider.”

It would probably mean an extra cost of approximately R80 – R120

per month for the average motorist, but this would be offset by the benefits of

having protection against civil claims for damages to third parties’ vehicles or

property during crashes, he said.

“Depending on the economies of scale, the monthly cost could be

even lower than the indicative amounts mentioned.”

So for now, motorists who do not have any insurance are still in

the clear regarding their budgets, although not having any cover could mean

serious expenses when involved in any kind of accident.

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