Government recently announced plans to make third party insurance compulsory for all South African drivers. When this will materialise – nobody knows for sure, but the theory is a very sound one indeed.

Currently, it is estimated that of the 9.5 million vehicles on South African roads, only 35% are insured!  That’s a scary statistic.

At this stage, approximately 70 to 80%  of motor claims are as a result of accidents.

Here is a typical scenario:

• Driver A (who is not insured) drives into the back of Client B’s vehicle (who is insured).
• Client B claims from his insurer, who repairs his car.
• B’s insurer, tries to recover his losses, only to find out that Driver A is not insured, or is unemployed, or lives in a squatter camp with nearly no earthly possessions and so Client B’s insurer gives up on trying to recover his losses.

The nett result? Insurance premiums increase.

Who pays? Client B (along with all those other 34.99 % of vehicle owners who diligently pay their insurance premiums every month).

The situation will be much better if more vehicles are insured, as the burden will be less on insurers who, at this stage, are carrying more than their fair share.  Motor insurance premiums should decrease, and the sustainability of the insurance and even the motor industries will improve.

The idea is great, and well overdue too.  It’s a step in the right direction by our Government and Department of Transport.

The BIG questions are…

1) Who will administer the compulsory Third Party Insurance scheme?

and

2) How will it be implemented?