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
  • Ian D - 2010-06-21 09:05

    This problem can be easily solved. Make insurance compulsory and payable at time of licencing the vehicle. If the vehicle is unlicenced and involved in an accident then the owner AND driver should be charged. We've set up courts to handle the World Cup problem - simply have dedicated courts to handle transport/motor vehicle issues.

  • Fresh - 2010-06-21 09:05

    Insurances will always rip us off, whether you claim or not the premiums keep on climbing. 2 cars and household @ R2600

  • Ian - 2010-06-21 09:05

    It should be Compulsory that ALL vehicles have to be insured. This will not only save lives as accident damaged vehicles will be repaired, it will create more jobs as more autobody-shops will open and economies of scale should reduce the premiums as well.

  • dave - 2010-06-21 09:07

    Much of the problem here lies with unscrupelous and baltent cheating in the panelbeating sector. I ihave heard this once straight from the horses mouth. The same with the towing industry where these sharks literally hold the driver to ransom-- often coming to blows at the scene of an accident and refusing to let the vehicle go back to the client before an exorbitant and inlated "towing charge" is paid. In many cases -- without the owners permission. Aster all, they reason, who will dare lay a charge of theft with them when thy have the police in their back pocket? After all, in the new South Africa, corruptionis a household name. THIS IS WHERE THE TROUBLE LIES.

  • Rob - 2010-06-21 09:13

    Not long ago someone on the radio asked why insurance premiums go up when values come down. They justified the increase in repairs as being the reason. Now Attie Blaauw of Santam says premiums are decreasing??? What a lie. Glad I'm not with Santam.

  • Graham - 2010-06-21 09:13

    The Insurance companies are to blame, I had an accident took my car in and told them that I wanted the best price possible, First quote R55400.00, I complained and told them that I would be paying cash, please sharpen your pencil, next quote R27500.00. I walked in and negotiated R24000.00 and the go ahead was given. On fetching my vehicle I was charged for parts and services not rendered. I then asked for that amount in refund and was paid. Job was good and I saved +R32500.00 by being vigilante. The Assesors are crocked.

  • Kevin - 2010-06-21 09:14

    Its the corruption in the panelbeater industry that is sinking this insurance industry. Go to any panelbeater and first question is , "is it private or insurance claim". A private claim is half of what they charge your insurance company. The work is the same so how is this possible?

  • Pieter - 2010-06-21 09:19

    Insurance companies must better monitor repair cost. I once had damage on my car, the quote for repair was R10,000 and Outsurance was willing to pay it but I thought it was a rip off and repaired it myself at a total cost of R700. The other time my wife "wrote off" our Golf, I bought it back from the insurance and had it repaired myself at a panel beater for R3,500. The big problem is panelbeaters ripping off insurance companies. Another example, there was a ditch in my vehicle's roof, I took it to PB for quote and said was for insurance, they quoted R3,500. I took it back 3 months later, said it was private, they quoted R900.

  • Pierre - 2010-06-21 09:23

    Introduce the MOT system as is running in the UK. Any vehicle older than 3 years will have to go through a roadworthy checkup every year. You can't license the vehicle if you don't show the correct certificate. This will get all the old and unroadworthy cars of the road. This will also save lives, money(RAF) etc. as there will be less accidents. The point system on your license if you're caught speeding etc. will also help.

  • Mike or Mpho - 2010-06-21 09:43

    That is called shooting yourself in the foot! Do you really believe that the South African consumer will feel sorry for these companies?After being ripped off for so many years? Firstly, I suggest the car insurance be compulsory for all public transport vehicles, especially the taxi industry, that way, you will see incidence levels to drop! Why has no one done this before? Such a simple cure for this "crisis"!

  • Citcat - 2010-06-21 09:48

    This is, unfortunately, an indication of how things have deteriated in SA. Preventing most of the causes of accidents mentioned in the article should be the responsibility of Government - unlicensed drivers, driving under the influence, poor road maintenance and unroadworthy vehicles. Unfortunately we sit in a position where the funds that are collected for these purposes are not used as they should be and there are too many law enforcement officers who just can not be bothered to enforce the law, for whatever reason. Now it is left to the private sector to sort out. I hope that the insurance industry has all that it will take to improve the situation and wish them the best of luck.

  • Concerned Motorist - 2010-06-21 09:51

    Is this not directly a function of the fact motorist does not adhere to the traffic laws anymore? I mean look on the roads, how it goes. No signalling for lane changes, use of cell phones while driving, irresponsible lane changing at intersections, wilfully causing of an obstruction, the list goes on. In my 9 km to work and back every day, I see all of this happening countless times in one trip, all factors leading to motor claims. Scary thing is, motorists at every level are making themselves guilty of these offences, not just taxis anymore. The reason, in my opinion, is because traffic laws are simply not policed anymore, so people realise the get away with stuff that previously would have landed them a fine. Those that have not yet broken a law see other people getting away with it and decide to join in the party. General lawlessness in our society is to blame for this and with time we are all going to pay the price, on way or the other, whether increases in certain taxes, or with our lives, we are all going to pay.

  • mustapha - 2010-06-21 09:54

    Hi Tom, Interesting article, you might want to circulate.

  • Mez - 2010-06-21 10:01

    Its simple ... make vehicle insurance mandatory like in first world countries - more people insured means better spread of risk, which will bring down the cost of insuring for the man on the street.

  • Jan van Vuuren - 2010-06-21 10:23

    40% of a vehicles price is made up of tax, plus about R10K for advertising to sell the vehicle plus the agency also takes a huge chunk of the selling price. If everybody works together, motoring will be cheaper. But if GMSA expects you to pay R3000 for a "lower control arm" then something is definitely wrong. The sam part costs at Goldwagen R340, also stamped "made in Germany". So who is fooling who? If they lower prices the vehicles will be looked after better but also the age of the vehicles will decrease

  • ir8m8 - 2010-06-21 10:32

    "Blaauw says as the vehicle becomes older the insurance premium declines, despite repair costs remaining high." - amazing that this comes on the back of a Carte Blanche Expose about a month ago where 9/10 insurers stated that they do not automatically reduce according to Market value. I have also said for years that a register needs to be created whereby drivers who are reported to drive badly pay higher premiums than those that abide the rules. Legislation and the system also needs to be revamped in terms of AARTO to ensure that the guilty parties are held responsible for their incidents, currently regardless of whether the accident was or was not your fault, your premium is affected and so is your "insurance record", the legal system behind the claim is also flawed, right or wrong is sidelined based on "agreements" being reached because no guilt can be determined. The entire system is geared towards the insurance houses covering their risk, regardless of right or wrong.

  • public-private - 2010-06-21 10:34

    Time for some public-private partnerships to get things sorted out on our roads. Perhaps the insurance industry can run the road-worthy checking system. Vehicles should be checked once in their first 5 years and then every 2nd year there after. How about increasing the insurance costs for those who are collecting lots of traffic fines? The insurance industry surely has a vested interest in the new AARTO system being successful.

  • Clive - 2010-06-21 10:40

    R14.8 Billion paid out for accident claims in 2008. Compare that to R17 Billion for education budget in 2010. So if we invested time & effort to positively change driver behaviours through education & enforcement impagine the positive economic benefits to the economy from the reduction inthe cost of motor vehicle accidents

  • Idiot - 2010-06-21 10:58

    Well the main reason is repair costs which then boils down to dealer prices!!! The price of car parts is a complete ripoff even pirate parts can be considered expensive. You really have to shop around to get decent prices

  • Graham - 2010-06-21 11:15

    I support that the country should introduce a road worthy system for cars 2 years and older but in addition every owner should be forced to take out basic insurance cover i.e. 3 rd Party cover and this should be produced before a licence can be renewed each year.

  • Gustav - 2010-06-21 11:39

    I have to agree that the Insurance companies have to look at repair costs. Most panel beaters inflate their costs of repair and parts the minute they hear it is work to be done on an insured car. I did a recent comparison between the cost of repairing my car with and without insurance. The insurance company got quoted R31 000 for the damages. I got quoted between R19 000 and R22 000. That is a huge difference!

  • chris. - 2010-06-21 13:07

    I reported a panel beater to my insurer after they charged them for 2 new headlights (R16K) and didn't actually replace them, they just polished the scratches out of the old ones. The insurer simply didn't care saying the panel beater can charge the amount originally quoted for even if they can, and do, repair something they quoted to replace. They need to get their own house in order....

  • Guy - 2010-06-21 13:25

    The fan switch on my Hyundai Sonata stopped working. Not the fan, but the switch to regulate the fan. I took it in to the agents in Gateway, Durban and they phoned a few hours later to quote me R16,000 to import the part from Korea. I was blown away by this and declined the offer. I told some guys at work and a youngster who works with us offered to take a look. 2 hours later the had soldered the crack in the electrical curcuit and the fan is 100%. This raises so many questions in my mind that I don't know where to start. The overwhelming feeling though is that we are all being ripped off very badly by citizens who are all making hay while the sun is still shining. This implies that we all fully expect the sun to stop shining on our beautiful country in the not too distant future. No one seems to be thinking long term anymore.

  • Cows r robots - 2010-06-21 13:31

    Some comments here a valid but some are absolute rubiesh. I had a car older than five years and never claimed except for a windscreen. Some car syndicate of thieves drove into my car whilst jumping a red robot. Was I reckless in my driving NO. Should I be penalised coz I was involved in an accident. HEll NO! However coz I was involved in accident some idiot thinks that Im at fault and its my driving that should be looked into. SILLY!

  • @Rob - 2010-06-22 08:11

    Your premiums go up every year when your value goes down- then you say you're glad you're not with Santam because they say they go down. Well I am with Santam, and my premiums go down every year, which doesn't make Santam's guy the liar you accuse him of, but your insurer a rip off artist. I have 3 cars (R250k), 2 motorcycles, house contents (600k) and the house itsself (1M+) insured for R1200pm

  • christo - 2010-06-22 08:42

    There is an easy way to alleviate the drunk driving problem. Just disband the Blue Bulls rugby team. Then all the drunken supporters will no longer have a reason to be out on the roads

  • Christo - 2010-06-22 13:25

    "Blaauw says as the vehicle becomes older the insurance premium declines, despite repair costs remaining high." Ok so riddle me this: Why after 3 years of being accident free, my car's retail value dropping from R190k to R109k does my insurer suddenly INCREASE my premium by no less than 30% in one year!? 30% thats absolutely rediculous! Somewhere someone has discovered a new gravy train and we have to suffer.

  • willem - 2010-06-22 13:33

    There is no road safety in South Africa. The clowns who call themselves traffic officers or metero police are not missed when they strike. The are a nusance to the public and are only interested in robbing the public on traffic violations that make very little sense. Why is Arrive Alive still alive? Why is the instances of driving under the influence so high when it is not the item that gets the attention of the authorities. It looks as if the authorities my be the most drunken drivers. Accidents happen but the recent work on our roads caused a large amount of accidents on their own. Common sense is not that common, and we can see it in the driving techniques of our people. If the traffic officers can't make a difference they must go away. A lot of people don't care how they drive because insurance will pay. Fortunately the culprits pay heavily for their habits.

  • goose - 2010-06-22 14:50

    Wow, so many comments? Problem is that each frikkin car manufacturer makes 3000 different models and each one costs a fortune in the form of tool & die costs. IF manufacturers produce only half the number of models, manufacturing costs go down massively, and this of course can be passed on to the consumer. Also, as many people above have stated, panel beaters and others in the industry inflate their prices. I do however also think that the biggest problem is the lack of roadworthy cars on SA roads, together with the fact that most drive with NO insurance at all! Insurance should be mandatory for ALL cars on the road else if caught the car should be crunched immediately! Zero tolerance. I have had to pay many times through no fault of my own when an unlicenced driver causes an accident then gets off scott-free!

  • DANIEL - 2010-06-22 15:10

    brokers dont encourage high excess nor insurers and assessors are useless

  • JamesM - 2010-06-23 07:39

    Make a minimum level of insurance ( eg 3rd party cover ; no fault , no payment ) compulsory for all vehicles before they can even go on the road. This will at least provide cover to the blameless and ensure a viable car insurance industry. BUT do not give it to government to manage ; the insurance industry must manage this. How to implement it ? There in lies the challenge ! Perhaps a "simple" piece of legislation that says if you are involved in an accident and shown not to have this insurance cover, a minimum fine of R5000 ( or 3 times the annual premium for the insurance cover ) can be levied against you by the court. This fine to be similar to speeeding fine ito context with all the related disadvantages of non-payment.

  • Enlightened - 2010-06-23 07:55

    There are a lot of people insisting that insurance be made compulsory. I'm guessing you guys can afford to pay a couple hundred every month for peace of mind. Now force that on people who cannot afford it, and it will have to be subsidised by government ( then you'll most probably moan about where your taxes go???)

  • Diets - 2010-06-23 08:13

    I agree, the problem is not parts that are expensive, it's the panelbeaters. How can they charge hundreds of rands for simply the removal of a panel with four screws which takes me 5 minutes to take off. Now the regulators are going to squeeze an already competative market with low margins namely the parts suppliers - WHO ACTUALLY ADD VALUE. Limit mark ups on the panel beaters WHO ARE SIMPLY MOVING BOXES AROUND! sure - take profit on the skilled part of the work, the panel beating itself, but not on the IP they didn't even create!!

  • Dries - 2010-06-23 08:42

    I'm one of the 65% without car insurance. I've got a 2005 E 500 Mercedes-Benz. About 3 months ago on my way to JHB from Welkom I hit a truck retread on the lefthand side of my car. The cheapest quote to repair the damage was R36245.00. I took the bumper to a panelbeater for repairs. He spray the front end. that is the 2 fenders, bumper and bonnet and I assemble the car. It cost me:- Panalbeater Labour to repair bumper and under tray and spraypainting R 3600.00 1 liter paint 145.00 1 L/H inner fender liner 397.07 6 Inner fender liner clips 43.08 1 Fog lamp 1240.60 4 Rivets (for under tray) 49.52 Total cost R5475.27 It took me about 6 hours to strip and assemble my car and for that 6 hours labour I save R 30769.73. a Lobour rate of R 5128.29. Not too shabby. That is why there is a Panalbeating shop around every corner

  • reply - 2010-06-23 09:06

    Firstly I think that one of the problems is how the people get their licenses, they are not starting at the old code 8, instead they are going for code 14 which are so easy to get. After aquiring this license they are still not able to drive a normal car. Secondly the bodyshops are ripping off the insurers with hefty costs. Seems no one are watching these costs. And then, the roads...well what can I say about this. Government are to blame for this, and be ashamed about this.

  • Chris - 2010-06-23 09:15

    I worked at CIB, the owner drives in a Porsche turbo, Ferrari's, etc. I seriuosly doubt they sturggling. All greed and corruption.

  • panel beater - 2010-06-23 10:43

    @johan,brett sharp and general.i am a body shop owner ,most parts are replaced mainly due to the gauge of the metal which does'nt allow pin and file,if you could fix it you'd land up with a panel full of filler!the labour cost are being offset by the price of the part.@brett sharp all insurers allow a 20%gp or 25%markup.you can't take a steak to the spur and ask them to cook it for you.to all readers i suggest all involved in collisions that they use a SAMBRA repairer(south african motor repairer association)member a branch of the RMI.you have recource through them or the ombutsman.

  • Dries - 2010-06-23 16:12

    For Panel beater: To eat out at the Spur is a different story. A meal for 2 and a bottle of wine is about R250.00 A body repair shop make his 20 to 25& mark up on parts but they buy a lot of 2nd hand stuff from the scrap yards. So! it is a ripoff and you make money you dont deserve. That is theft an fraud

  • Ange - 2010-06-24 13:24

    The best way to overcome the high costs is to make Third Party Insurance compulsory for all as it is in European countries and the USA.

  • Kevin - 2010-06-24 15:43

    For all those calling for annual Roadworthy Tests etc. Remember all taxi's and busses need to be roadworthied at least once a year. The sucess of this can clearly be seen in the vehicles on the road.

  • TradeMarket - 2010-06-24 16:45

    consumers are always ripped off for insurence. insurence companies are not struggling but very greedy. to see where most of money goes to just look at the management salaries- that is where losses come from. Africa is poor and we pay the highest insurence premiums in the world- plz explain. we are simply cash cows hey? smame...

  • panel beater - 2010-06-25 10:53

    @dries,you as the consumer have recource,read my previous post in full.{:)

  • YN - 2010-06-25 11:01

    The knock-on effect is what drives up premiums ie The tow guy charges exorbitant fees to uplift a vehicle. the Panel beater has to pay the towing guy a 'bribe', the panel beater has to recover these costs plus the cost of repair plus his profits plus the kickback for the assessor plus the 'build-in' of the customers excess, which is billed to the insurance company. Example: Towing Cost - R1000.00 Bribe to Towing Guy R2000 Bribe to Assessor R2500 Repair Cost (including profit) R10 000 Excess Built In R1500 The 'Should-be' cost to the Insurance Company is R1000+R10000-R1500 = R10500 The Actual Cost to the Insurance company is R1000+R2000+R2500+R10000+R1500 -R1500 = R15500 Now go figure

  • v - 2010-06-25 11:21

    Yet state vehicles are not insured.

  • Libby - 2010-06-25 15:43

    I am involved in claims on a daily basis, working in one of the smaller but better brokerages in Durban. Just to clear the record, an excess is contractual and one that you pay, per section of the policy for each and every claimable occurrence. there are policies which provide an excess free perk to over 55's or retired/pensioned persons. Shop around when you receive your renewal, just like you would when buying a car. There ARE honest folks in the industry - tow operators aside ! Brokerages who have been in the game for years have staff who know the ropes - talk to them, ask the questions and above all, when you buy a valuable item or a "high risk item" - let them know so that they can advise you the best way to protect your asset. Your insurer/broker is not clairvoyant and won't know you possess anything valuable unless you advise them. Your broker willnegotiate prices when you claim - it's their job! As for a payback bonus and folks leaving established companies when their premiums are higher than the outbonus companies. THINK! for not claiming for 3 years, you get premium back. who the heck can afford to finance their own losses for three years. can you buy another car if yours is stolen? if your house catches fire, can you build another with your own funds? hardly likely ! Use the darn policy and forget the cash back carrot ! I bought a wing mirror for R50 off a salvage dealer, he fitted it for free. Dealer wanted over R600 plus labour! I repeat - SHOP AROUND !! From an honest broker !!

  • Mr Fillis - 2010-06-28 09:14

    I REFUSE to have insurance. I work in the Regulatory industry and EVERY SINGLE Insurance company has been found guilty of criminal or unprofessional conduct with regards to how they handle claims. I've been driving for almost 10 years without a single incident. Because i know the risks, i drive extra careful. Psalm 91 is my Insurance

  • Ali - 2010-07-12 14:33

    I have just recently bought a car and I was paying over R800 for an Ikon 2005 and I felt that it was too much so I cancelled the insurance, but unfortunately I was involved in an accident last week and the car is in a bad shape, its body is damaged. I am still paying the bank for the car, what options do I have in this kind of situation?

  • AJ - 2010-07-16 12:51

    Insurers should have access to demerit points on your licence, and increase premiums of those who violate traffic rules. However, they first need to get their house in order, and the corruption in the police and government needs to be eliminated as well. All part of the ideal dream - we can only hope, unfortunately that seems to be all we are doing!

  • Louis - 2010-09-06 12:08

    @ Charlotte. R6bn is what was made in the total industry. But still, woth that profit, they need to pay: 1)Telkom so you can talk to them, 2) their staff whom handle your claims, 3) system fees and software licenses, 4) Rent just to call a few. Lots of people complain about insurance. I dare you to spend time with your broker/insurer to see how it all works, it is not just a matter of collecting money and paying claims

  • QFACTER - 2011-02-08 20:00

    1 YEAR NOW STILL DONT HAVE INSURANCE I DONT SEE ANY NECCESITY OF HAVING IT GOES... I REMMEMBER WHEN I START MY INSURANCE WITH THEM I DONT WHAT TO MANTION NAME I WAS PAYING..R750.00 FOR THE FIRST MONTH..SECOND MONTH R1200 I ASKED THEM WHAT IS HAPPENING THEY SAID TO ME..THE COVER THAT I TOOK IS PAY AS YOU DRIVE BUT THOU THE DIDNT MENTION IT TO ME.TO BE HONEST SOME BROCARS ARE CRIMINALS.