A study conducted by the Automobile Association of South Africa revealed that between 65 and 70% of the estimated 12-million vehicles on South African roads are uninsured, and this percentage is growing annually. In other words, there are nearly eight million uninsured registered vehicles being driven around South Africa. The probabilities are that if you are involved in an accident, you only have a three in ten chance of it being with someone who is insured, and therefore able to cover any damages.
However, the problem goes further than that. In fact, the AA estimates that up to 800 000 vehicles in South Africa are either unregistered or classified as unroadworthy, and thus uninsured, too.
Statistics from the Road Traffic Management Corporation (RTMC) show that there are more than 800 000 crashes in South Africa annually. Based on the insurance statistics, around 520 000 cars that are involved in crashes are uninsured.
The AA advised motorists to cover themselves "adequately". As more and more people do not insure their vehicles, responsible vehicle owners have no choice but to insure themselves to prevent future problems. Sometimes, when costs are an issue, motorists should strive to find a suitable option to give themselves a little cover instead of none at all.
The problem of uninsured vehicles is worsened by the way the change of vehicle ownership process works in South Africa. As a result of the current economic climate, the purchase of second-hand cars has grown exponentially. An integral part of the change of vehicle ownership process, for both the buyer and the seller, is ensuring successful car insurance transfer to the new owner.
Nevertheless, if the car being sold is not insured, there will not be a car insurance policy to be transferred at all. After buying a new vehicle, the buyer may feel that taking an insurance policy will only drive their monthly expenses up and may decide not to take one at all.
In fact, according to an article by Moneyweb, unaffordable premiums are the reason why only 30% to 35% of South African motorists have car insurance. It may be true that the costs of insurance are too high. However, the costs of non-insurance are even higher and that not insuring a vehicle properly places the motorists at a greater financial risk.
It takes time and effort to get insurance which suits your pocket’s needs and which gives you the cover you need or want. As low premiums sometimes fall short when claims are made, reading policies carefully and understanding all the aspects of the insurance are worth practicing.
The insurance industry has voiced its stance towards the problem. From their perspective, the problem is the result of the insurance industry paying for too many accidents caused by the general lawlessness on roads as well as by their generally poor condition.
The fact that only 30%-35% of South African motorists are insured places the car insurance industry in a tight financial spot, as they are unable to claim funds from uninsured third parties. The remaining 65%-70% of uninsured motorists are financially carried by 30%-35%, which makes it impossible for general insurance companies to lower premiums.
That’s the reason why the car insurance industry has been putting pressure on the government for years to make third-party insurance compulsory for every motorist. This will help reduce the current financial pressure on the industry, increasing the possibilities of making products more affordable.
In this context, insurers have welcomed the government’s proposal announced in the Budget to make third-party insurance compulsory for all vehicle owners in South Africa. Compulsory third-party cover is expected to bring down the cost of car insurance premiums for those who are insured and to bring enormous benefits to those who have never covered themselves.
Even though third-party cover could be seen as an additional cost for those who don’t have any vehicle insurance, it could also save them in the event of their vehicle being in a crash where they are not at fault, since the at-fault party would be covered by insurance.
Insurance is a necessity despite its costs. However, affordability is just one side of the coin. It is also important that when taking out insurance, motorists understand exactly what they are getting, and how much it covers if they file a claim.