Will car insurance become compulsory in South Africa? A new report by the South African Insurance Agency (SAIA), which will be released at the end of this month, will outline the costs of making third party car insurance compulsory in South Africa.
Car Insurance Now
Currently, rather than having required car insurance, instead South Africa uses the Road Accident Fund (RAF). A percentage of money made from petrol sales goes towards the RAF, and in the event of an accident a third party can make a claim from the fund to cover damages. The RAF spends approximately R1.5 billion each month helping car accident victims.
One of the results of this is that the number of people with car insurance in South Africa is lower than in many other countries, with only approximately a third of vehicles carrying insurance.
Proposed Changes in Car Insurance
There is now an increasing push to make car insurance compulsory, however. Compulsory third party car insurance (a type of insurance that covers damage to the no-fault party in the event of an accident), could, according to the SAIA report, improve road safety as well as cutting government costs for covering road accident damage.
What is unclear is how exactly the proposed changes would work, since, according to the AA, there would need to be an initial fund to cover the costs of accident damage to give insurance companies time to build up a stock of premiums themselves before they can start paying out damages. Basically, there needs to be a changeover period, during which time customers pay compulsory premiums and insurance companies build a fund of money, but actual damages will be paid by someone else, presumably the government.
What This Means for You
Should the government pass a law requiring car insurance for all vehicles, this obviously means possible higher costs for some (the uninsured). If you are currently uninsured, you will be required to start paying insurance premiums or risk sanctions. However, if you are insured there is unlikely to be much change in your situation. Given that the Road Accident Fund would be less likely to have to pay out damages, there is also the possibility that petrol prices will probably go down. Currently, R1.54 for every litre of petrol bought goes to the Fund. If this was deducted the average driver would pay around R40 less per week in petrol costs, amounting to about R1,600 per year.
The introduction of compulsory vehicle insurance would bring South Africa in line with many other western countries, where car insurance is already a legal requirement. But it remains to be seen how the government will handle the challenges of changing the current situation.
Main Subject: car insurance
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