Drivers: Get insured or get ready to walk

About eight million uninsured motorists could be forced to buy third party cover if the insurance industry gets its way.

The industry is collecting data and preparing a report for the Treasury and the Department of Transport.

"We've been working on this for several years but it is a priority project this year," the SA Insurance Association's Dawie Buys told The Times yesterday.

About two-thirds of the cars on our roads are not insured , said Buys. And many of those who do pay insurance premiums struggle to keep up.

Debt-stricken consumers - with inflation higher than the upper limit of the Reserve Bank's target of 6% - are struggling to cope with the premium increases imposed by short-term insurers.

But the weaker rand, the value of which has dipped by more 30% against the dollar over the past two years, has forced the hand of many insurers.

Alexander Forbes' Gari Dombo said yesterday that the insured were heavily subsidising the uninsured.

In a country with one of the highest vehicle-accident rates in the world, the insurance industry was paying about 70% of all vehicle claims for collisions and related damage, said Buys.

"Insurance is about numbers: if you bring in the numbers, premiums should go down," Dombo said. "It might cost R100 to R130 a month for third-party cover."

This would cover only property-related damage and not injuries, which would still fall under the Road Accident Fund and its successor, the Road Accident Benefit Scheme.

But compulsory insurance can be enforced only by legislation.

To get motorists to pay could be difficult, judging by the resistance to e-tolling in Gauteng.

Department of Transport spokesman Tiyani Rikhotso said: "We'll engage with [the insurers] and if it is in the best interests of the public it will go further."

Though he would not comment on the merits of compulsory third party insurance, he said it would be an "all-involved" process.

"It can't simply be the minister of transport waking up and saying it is compulsory."

There would have to be wide consultations and canvassing [of the proposal]," Rikhotso said.

The insurance industry has been hard hit in recent years by pay-outs for damage not related to road accidents."

Paying compensation for damage caused by extreme weather has been a major drain on the industry.

The earnings of the country's five biggest short-term insurers dropped by 12% on average last year, according to research by auditors PricewaterhouseCoopers.

Golf-ball-size hail stones damaged thousands of cars in November and earlier this year.

Industry profits might remain depressed primarily because of motor insurance, Dombo said.

Battered middle- to lower-income consumers often stop paying their premiums when they are stretched for cash.

"Some consumers don't pay, some cancel policies, some just buy cheaper policies," said Ian Kirk, outgoing Santam CEO, at the presentation of the short-term insurer's half-year results.

According to Buys, the insurance industry has had "high-level engagements" with the Treasury over the past two years but was now preparing all the facts and figures it believed it needed to convince Finance Minister Nhlanhla Nene, and Peters, that compulsory third-party insurance would benefit most motorists and consumers.

Dombo said the change would help panelbeaters and assessors to integrate with the mainstream industry.Additional reporting by Reuters