Fin24

Crisis in car insurance

2010-06-20 16:54

Johannesburg - Drastic steps are required to ensure that motor insurance remains affordable for consumers and that their insurance companies can continue offering motor vehicle cover.

South Africans are paying more for motor insurance here than in any other country and insurance companies have for the past two years or more been showing burgeoning losses in their motor book.

Because many people find the premiums for motor insurance unaffordable, only about 35% of the just over 9.5m vehicles on the roads are insured.

Nevertheless, the number of accident claims received by insurance companies keeps rising and the cost of repairs is extremely high.

The South African Insurance Association (SAIA) has now launched a comprehensive strategy to ensure that affordable and sustainable cover will become available to South Africans in future.

Viviene Pearson, who was appointed head of motor insurance at SAIA in April, says the costs of repair work and the incidence of accidents are soaring and pushing up both insurers and consumers’ costs.

Crime and road safety also play a role in the high number of vehicle-related claims.

Pearson says some of the smaller insurers have already indicated that they can no longer offer motor cover. The premiums that they collect are not enough to pay the claims.

In 2008 short-term insurers, according to the latest available statistics, collected R20.8bn in premiums for motor insurance and paid out R14.8bn on claims.

Crime is no longer the biggest problem, although it still occurs.

Pearson says in 2002, before the insurance industry and the SAIA took steps to combat hijacking and vehicle theft, crime-related claims represented 60% to 70% of motor vehicle claims.

Currently claims for accident damage comprise 70% to 80% of the claims.

If insurance companies can no longer offer vehicle insurance, this will ripple out to the entire economy and those providing finance.

Financial institutions will no longer provide finance and people will no longer buy cars, which would seriously impact the motor industry.

The SAIA, in collaboration with industry, has drawn up an action plan that was accepted in February.

Committees are being appointed to attend to the various problems.

One of the major problems is the behaviour of drivers, says Pearson.

There are many problems regarding fraudulent driving licences, the lack of driving skills and corruption in the licensing divisions. Driving under the influence is also a serious issue.

According to figures from Arrive Alive, cases of driving under the influence of alcohol soared 336% for all categories of vehicle between 2004 and 2008.

The SAIA is going to attempt to make driving skills and general road safety part of the school curriculum.

Part of the SAIA’s plan is also to introduce regular roadworthiness tests for all vehicles. A roadworthiness test is currently done only when a vehicle is reregistered.

Repair costs

The cost of repairs is a massive problem for insurers.

Santam personal insurance underwriter Attie Blaauw says repair costs are an even greater problem than motor car theft.

Blaauw says as the vehicle becomes older the insurance premium declines, despite repair costs remaining high.

Pearson notes that in the new strategy ways to make spare parts and components cheaper are being investigated. This would be done in close cooperation with the motor industry.

Insurance companies are haemorrhaging. They don't wish to get rich from motor insurance, but only make a profit and keep premiums affordable, says Pearson.

The poor condition of roads and motor vehicles also contributes to the high accident and claim statistics.

The average motor vehicle on South African roads is 10 years old and taxis are on average 13 years old.

This means that many vehicles are not roadworthy, even though they are licensed.

- Sake24.com

For business news in Afrikaans, go to www.sake24.com.

Comments
  • Joe - 2010-06-20 17:04

    Third party insurance was a requirement for every vehicle on the road. Just bring that back, or sue the state for failing to police the roads.

  • Brett Sharp - 2010-06-20 17:10

    Why do panel beaters charge twice as much for spare parts than the actual motor dealers do on their quotes? I have never understood this. A bonnet would cost about R7 000, 00 at Ford, yet the panel beater charges about R12 000, 00 for the same bonnet. Seems stupid to me. Anyone explain that?

  • SA UK - 2010-06-20 17:11

    Motor vehicle insurance should become the law in South Africa with a yearly roadworthy inspection carried out as is currently the case in the UK. This will result in much less road accidents.

  • Ben - 2010-06-20 17:16

    Solution is very simple,make car insurance compulsory, just like in Europe,and premiums should go down, as 65% of vehicles will be brought into insurance net. Force car manufactures and dealers to stop charging extortion amounts for parts, and voila, problem solved, charge anyone caught driving without a license serious amount of money, so they think twice before setting out to kill or mame somebody, and voila, problem solved.

  • michael - 2010-06-20 17:17

    This shows that insurers should spend more time looking at the individuals, and start rewarding safe drivers. And I don't mean by forcing people into 4-5 year contracts with the possibility of refunds. I have been there, and am not interested. I haven't claimed against insurance since 1996, yet I am still treated the same as all the drivers out there.

  • Thandi - 2010-06-20 17:17

    Hardly surprising with the abominable general standard of driving in South Africa, the pathetic excuse we have for traffic cops, and the general neglect our road infrastructure. A road trip, even if just a short commute to work, has become one of 'running the gauntlet'.

  • CHARLOTTE - 2010-06-20 17:17

    SO IN 2008 THEY STILL MADE R6 BILLION?? HOW IS THAT NOT A PROFIT??

  • TRUE2SA - 2010-06-20 17:18

    The cost of repairing a vehicle is sky rocketing because there is absolutely no or very little control on the prices charged by the panelbeaters for their work. And what about the parts of cars that mysteriously 'go missing' when the in-tow vehicles are finished with it?? I am not sucking this out my thumb...I have had three experiences in this regard in the past two years. My daughter has 'written off' her VW Playa, by knocking the side of the ONE door and damaging the mag and tyre of ONE wheel... in the past this would have been fixed and replaced, but no, the insurance had to 'write off' the entire car. My aunt 'wrote off' her car by hitting another vehicle from behind, damaging the entire grid, bumper and bonnet of the car...not even the radiator was damaged...yet again the car was 'written off'... then again my grans' car was damaged by someone ( unidentified ) who backed into her side doors and damaged the rear panel of the car...low and behold...again the car was 'written off'...now how on earth can we as insurance owners win??? The insurer sends out an assessor and time and again i see small defects get blown out of proportion and the vehicle 'written off'...this is definately something our insurance companies can start investigating. By the way..in all three the vehicles only one single airbag opened...Insurers complain and complain about drowning claims...yet they don't do their claims analysis correctly. If they had, they would have spent no more than R 37000 on all three vehicles ( airbag included ) instead of the R92 000 they had to cough up.

  • HB Murphy - 2010-06-20 17:23

    The reason for the high cost of repairs is that some panelbeaters over charge for the damages on one's vehicle. When your vehicle is repaired the owners never get to see the final quote so that they can check to see if all the parts were actually replaced, don't know why this happens

  • Same srory - 2010-06-20 17:24

    I hope one of the factors investigated is ROAD RAGE. i encountered an idiot with 2 kids in his SUV, that felt he had special rights. So right in the presence of the useless JMPD he forces his way into my lane....nobody cared at the end and the damage was limited to painting on my vehicle...no reckless driving charge coz JMPD had 10 reasons why not, just like the SAPS, BUT IT WAS UNCALLED FOR DAMAGE - HE DOES NOT DESERVE TO SHARE OUR ROADS! [OR TO HAVE KIDS]

  • John A - 2010-06-20 17:30

    Perhaps an investigation into what panel beaters quote these days will reveal the source of the problem. They should be called "panel beaters" of course. The name could not be further from the truth. I got two quotes for the repair of the rear quarter of a Renault Scenic just bumped and distorted which did not render the car undriveable. R37500 for one and R17500 from the other. Both claimed that they had to rebuild the rear side of the car with new panels. Panel beating was "impossible". Chances are as well that if you claim it as a "private" deal, the cost will be less than a quarter of that quoted. The Insurance industry use their own agents to carry out the damage assessments and pay them on a commission basis. Higher quote, higher commission payout! They are corrupt from within.

  • HateGauteng - 2010-06-20 17:38

    As part of the process to get a drivers license, there should be an IQ test and something that tests distance, speed and time judgements. On the other hand, remove the corruption at the licensing centres.

  • Maggie - 2010-06-20 17:47

    Perhaps they should also investigate why it is so expensive to have your vehicle repaired. I've personally been able to "negotiate" a 60% reduction in repair costs if I paid cash and not claimed via my insurance company. How is this possible?

  • Lesego Ranchu - 2010-06-20 17:48

    Sounds like a crisis .... but I am sure the commitees will do the right thing. Good that crime has gone down and roads are a definite cause of accidents. I have often wondered how many car crashes there has been since roadworks upgrade for the 2010 WC (can we get stats for that)? I hope those of us who have not claimed are not having to pay to subsidise those claiming. Insurance is high enough as it is!

  • JAWS - 2010-06-20 17:49

    Make proof of insurance cover compulsory when liscencing a vehicle annually, this will make sure that people who consider themselves capable of affording a car actually have the meaqns to insure this vehicle as part of the operating cost....

  • Keith - 2010-06-20 17:51

    Easily solved as in Europe - Third Party Insurance (as a minimum) is compulsory. Proof must be carried as per your driving licence. Thus the cost is spread over ALL vehicles on the road.

  • Richard - 2010-06-20 18:37

    My wife recently damaged my car in a parking garage incident. The 5 quotes from 7 vehicle repairers ranged from R18700 to R1240. I went looking some more and found two two - R8200 and R4700...! There are people out there in the vehicle repair industry that are REALLY RIPPING the public off!!! I had it done at the cheapest one and their work was perfectly good. They quote to replace parts that are easily repaired - and then they actually repair them, but they charge for the replacement. That's FRAUD - and the consumer pays for it.

  • Cynic - 2010-06-20 19:02

    They're just trying to soften us up for the next round of above-inflation increases.

  • IAIN - 2010-06-20 19:19

    Accidents will only be reduced when there is ENFORCEMENT of the law. Day in and day out as I drive I encounter drivers being reckless. This recklessness increases from about 6 - 7 in the evening when they know that there are no traffic officers at all on the urban roads. To believe that education on road use is going to improve things is being very naive. People do not act recklessly because of a lack of knowledge - they get reckless because they do not care for others and because they know that the likelihood of being caught is minimal.

  • Chris - 2010-06-20 19:34

    From article: Average age is 10 year for car, 13 for taxi; "this means that many vehicles are not roadworthy" The reason for road unworthiness is not only dependent on age; it is lack of law enforcement & lack of respect. Traffic cops need to do a better job - arrest drivers and impound vehicles not roadworthy ; sell vehicles for scrap metal and use the money train even more traffic cops.

  • Paul - 2010-06-20 19:51

    It should be law that all licensed vehicles are insured at least for third party claims - must be linked to license with immediate expiry if premium is skipped

  • Pieter - 2010-06-20 20:05

    No person should get motor finance if car insurance is not included in the monthly repayment policy. Touch wood, i have been driving for 38 years, never involved in an accident, but paid for insurance all these years. Could have purchase a car cash already.Also, maybe proof of insurance to be shown before car renewal license is issued!

  • Ian Harrison - 2010-06-20 20:18

    The problem with repairers is that there are no more panel beaters left. There are only part replacers and spray painters. And we all know what a rip-off parts are!

  • E van Rooyen - 2010-06-20 20:55

    Well, repair costs are totaally out of line. Why, the panel beaters replace body panels with cheap aftermarket panels, buy them in for peanuts and sell them for OE prices. The worst of it all is that the insurers and the loss adjusters know this and allow it. How can you buy an aftermarket headlight for R95.00 and fit it to a car and charge R1200.00 rand, the same price as a original equipment part. I think that there is a big monopoly and that they all work together to make the most money money. Maybe they ought to be investigated.

  • john - 2010-06-20 21:09

    its people and their behavior, simple as that. Of course our terrible roads, corrupt money making - no safety cops doesnt help either. Too many fraudulent licenses and the many "first generation" drivers who simply do not know how to behave behind the wheel

  • Johan - 2010-06-20 21:38

    The vulture tow-in companies are also culprits in escalating the costs. My son was in a minor accident and although I told him not to let them tow the car away, the slimy operator convinced my son that by law he had to take the car to the 'AA Yard'. Next day I made contact with the AA who in turn knew nothing about my car. Eventually, I phoned the tow-in company and found the car at their premises (not more than 5km from the accident). The car was still 100% drivable, with only a few cracks in the grille. The tow-in sharks wanted R4700 to release the car and I had to pay it. The damage to the car amounted to about R400, but the insurance now had to fork out more than R5000.

  • Peter - 2010-06-21 01:26

    According to the figures above they made R6 billion in 2008 on turnover of R20.8 billion. A 30% gross profit is surely acceptable in anyone's book.

  • Frankie - 2010-06-21 03:36

    In New Zealand it is compulsory to get your vehicle roadworthied every 12 months. This will solve alot of the frustration we have in SA with unroadworthied cars in our country.

  • GKM - 2010-06-21 04:40

    Make spares cheaper - my car, a landrover has an engine made by BMW. The same elactronic injector part is quoted at R 9000 by Landrover, R 6600 at BMW and R 5400 at Bosch electric, who manufacture the component. My insurance company insists that when I break down, I am towed to the agent, hence I am stuck to paying the R 9000. What I fail to understand is what value is added between Bosch and Landrover as non of the quotes includes any fitting.

  • GKM - 2010-06-21 04:44

    My wife asked me just yesterday, what is it that her vehicle insurance actually does for her, if on her one claim in 7 years (windscreen crack) they asked her for an R 600 excess. I told her the benefit was if the car was stolen, but given this article, that is no longer an issue.

  • ROB LOBLAW - 2010-06-21 06:55

    It comes as no surprise that car insurance companies are struggling. The amount of wreckless drivers on the road is increasing by the day thanks largely to the non-existant traffic police. The amount of corruption at road worthy centers is staggering and thats compounding the situation. This issue is one of many that have been neglected over the years by the ANC government leading to this country firmly on the road to third world status...and no fancy World cup tornament is going to change that fact!!

  • gasguy - 2010-06-21 07:01

    Premiums were R20b payouts R14b what is the frikkin problem they just not making enough bonuses. This out to a 30% margin.The insurance co's just trying to milk us - this is the first press release telling us to expect premium hikes well over inflation - again!!!!

  • Njobos - 2010-06-21 07:07

    Having at least "Damage to 3rd party" insurance should be made compulsary. No licence rewals should be issued without confrimation of such insurance.

  • Jacques - 2010-06-21 07:08

    What a load of bull. Clearly it's not outsurance' statement. My girlfirend's premiumm went up this year by about a hundred rand on an older opel Corsa. When asking them, they told her that it's inflation, and although the car's value decreases, they won't review it based on the lower value of the car and the fact that she's becomming a more experienced driver. In the end it's cheaper to can the outbonus and move over to someone else. (She's going to save 2 or 3 hundred rand by giving up the outbonus) Complaining about non roadworthy vehicles just after suggesting cheaper parts? Please go and rethink this article.

  • Vusi - 2010-06-21 07:23

    What next? Now the insurance industry expects risk free profits. Eish! Your business in involves risk; live with it. Just like we have to live with regular increased premiums from you, even though we never claim.

  • Johan - 2010-06-21 07:32

    Deflation in the motor industry overdue.

  • Ralph - 2010-06-21 07:34

    I tell you the truth today, the motor industry won't leave Africa because that is where they make their profits. That industry is full of crooks and fraud especially the dealerships and the assessors from the insurance companies. I don't trust them and I won't have an insurance.

  • Denise - 2010-06-21 07:41

    I am confused - Insurance companies are haemorrhaging? "In 2008 short-term insurers, according to the latest available statistics, collected R20.8bn in premiums for motor insurance and paid out R14.8bn on claims." R6bn is haemorrhaging?

  • Clint - 2010-06-21 07:44

    Here is a tip to South Africans, stop driving like idjits !!! ( I am not just referring to Taxi drivers )

  • Car owner - 2010-06-21 07:46

    Do we really have panel beaters or are they just fitters like the mechanics? My experinece with the one or two accidents I had was that the parts are replaced very quickly and the old parts misteriously disappear.What I did find out on one occasion was that the part was never replaced but was paid for. Makes you understnd why some panel shop owners have the luxuries they have despite the though times we are in. Start with the root of the evil and stop nailing the premium payers.

  • Dre - 2010-06-21 07:53

    Fraudulent claims are also a huge factor. If basic cover was made compulsory then maybe we wouldn't have the "OK, you say X and I'll say Y so insurance pays then you pay the excess". After all, if you can't afford the insurance, you can't afford the car. Maybe then we'd also have less of these wannabe yuppies spending 50% of their salaries on cars they can't afford.

  • Jorge dos Santos - 2010-06-21 08:09

    I have heard that a lot of the assessors not only take commission from the panel beaters, but that they actually demand this payment. Could this be the cause for this crisis? Could it be that the motor companies are making so much money from parts that it has become prohibitive to repair at a reasonable price. Just asking!

  • Petra - 2010-06-21 08:10

    This problem could be greatly minimised by introducing an anual Roadworthy test policy as Germany and the UK have in place. This eliminates accidents caused by vehicles that are not fit to be on the road.

  • Lost - 2010-06-21 08:21

    If you damage a bonnet or a bumper or a fender, have a look at the quote for having a private repair done vs. a claim quote at the same repair shop. The cost will be at least 5x more for a claim - repair shops are the criminals here. they quote original part prices and put pirate parts on, you will never know the difference as pirate parts like bumpers and fenders and bonnets are just so good these days as originals making even more money out of it - criminals!

  • Beaten - 2010-06-21 08:21

    What about collusion between insurance companies and repair shops. Where private panel beaters will do a perfect job on a bad dent for R1000-R2000 the so called insurance assessor at the big shop round the corner will glance at the damage and quote R7000-R10 000 without blinking or giving a detailed costs breakdown.If you insist on a breakdown it's a load of bull anyway. Maybe it's time for an investigation.

  • andrea Prelorenzo - 2010-06-21 08:34

    I think it is about time.Insurance risk is high therefore solutions must be offered..One should also have a look AT DISPOSABLE INCOME TO REENERGISE THE the motor industry.

  • Eman - 2010-06-21 08:53

    You know that there is a mafia style operation in the motor repair industry. Prices are inflated once they know that insurance will pay. Car parts are not that expensive and the corruption is now coming from the repairers. People should drive what they can afford to drive but don't rip us off. Now that they are bleeding the insurers, they cry foul!

  • MJ - 2010-06-21 08:57

    What a joke! The insurance industry has been aware of this problem for YEARS. How do Iknow this? Because I used tob e a broker who attended all the big insurance companie's lectures. Yet so far; litte if nothing, has been done. In Europe there are tariff tables according to which different cars are rated. e.g. a Merc SL 55 would mean a much higher insurance premium seeign as it is a luxury vehicle. To replace just a few of the airbags in such a vehicle costs more thant the average Citi Golf on the roads costs 'new'. As such, the poorer consumer has been subsidising the more expensive motor vehicles on the road for a long time. Another classic example where the corporates have been dreaming whilst enjoying their excessive earnings instead of doing the right thing which woukld be (in case they are reading this) to help the consumer!

  • Johan - 2010-06-21 08:59

    Panel Beaters are no longer "Panel Beating" but have merely become replacers of damaged parts. In cases of minor damage, which could easely be repaired it is rather taken care of by replacing these parts. Assesors are also to be blamed as they too easily agree to this form of "repair" I have had first hand experience of this.

  • Ian - 2010-06-21 09:01

    Why are the costs rising??? too many accidents and claims which are inflated by the motor repair industry they claim. There are several issues to be addressed or looked into here. 1 The amount of semi literate and inept drivers who ahve bought or photocopied their own licenses, this by using the "fake-Proof" Card licenses which we the motorists had to fork out good money for.....who is the owner of this company that makes these cards.....Take a guess.......One Esteemed Jacob Zuma and his sidekick Shady Schaik.....Go figure why we "needed" this system...... 2:The greed and avarice of the Motor industry once again comes back to bite it and everyone in it on the butt........and they aren't even using NEW parts most of the time.....Someone needs t regulate this industry way more and tighten things up seriously..... 3: The "well trained and conscientious drivers we have, especially those in the taxi industry and heavy vehicle long distance transport services, are also to blame for these high numbers......here we can blame our efficient traffic Policing system, once again implemented by some dimwit who has most probably also got a faked license and now wants to sprout off as an expert..... The Only way you will get motorists to obey and respect traffic police is when you can convince them that this is not a money generating exercise and is actually there to police the traffic to make it safer for motorists.. this has worked wonderfully in the UK which is where our bright sparks in the traffic office get most of their ideas from anyway.....Lack of respect leads to wiping your butt on their regulations and rules....its a proven fact. Insurance companied are the worst culprits and are now Bleating and laying the blame Elsewhere instead of standing up and owning the fact that they have been ripping off the motorists for years now, inflating premiums and finding any minor excuse to repudiate any claims, this in turn has led to a "stuff you" attitude from the motorists who insist on having their claims inflated to bypass exorbitant excess payments and to make up for the ripping off which the insurance industry has extorted out of them. The insurance industry is the guilty party here and should have their butts kicked back into line with as much savagery as Julius Malema can muster. Give the some of what they really deserve, they are botto feeders preying on honest motorists