Hanna Barry
1 minute read
31 Jul 2015
11:00 am

Costs of car insurance weigh heavily

Hanna Barry

Car insurance is expensive, which is probably why just 35% of South African drivers have it.

Picture Thinkstock

With the National Treasury calling for reduced costs to promote wider coverage, insurers argue they are exposed to the vagaries of local roads and frequent accidents. In a panel discussion at the annual Insurance Conference in Sun City, owner of insurance broker firstEquity Risk Management Services Seamus Casserly said as much as 40% of an average motor claim goes towards the cost of towing a vehicle.

Repair costs also remain exceptionally high due to the significantly more expensive original equipment manufacturer (OEM) parts owners are obligated to use while the vehicle is under warranty. The weakness of the rand drives the cost of imported parts notably higher. John Melville, executive head of risk services at Santam, said these costs are reducing sustainability.

Melville said the industry was moving to publish a rating system for the cost of repairs and maintenance to educate consumers.

“The industry has been lobbying government for the past decade to introduce compulsory third party insurance,” said head of personal lines at Hollard, Willem Smith. “If one can get third-party liability insurance through, that will go a long way to assist with broadening the pool.”

CEO of the Road Accident Fund (RAF) Eugene Watson said a 35% penetration level for insurance of about 11 million cars was unsustainable. He urged insurers to develop new products to meet the uninsured masses’ needs. The RAF spends R22 billion annually on accident compensation. South Africa spends about R306 billion annually – about 8% to 10% of GDP – on costs relating to road fatalities.