South Africa’s new Aarto Act and its demerit system will have a direct impact on car insurance, says Old Mutual Insure insurance expert, Christelle Colman.
“The demerit system could potentially be linked to an underwriting criteria as it does reflect driving behaviour, she said. “Drivers with poor record on this system could face higher premiums – but that would be at the discretion of each company.”
Depending on how well and efficiently the bill is rolled out, Colman said this new law could see good drivers benefit from better premiums with the bad drivers being penalised.
While the transport department says the new law will help reduce road deaths across the country, it does paint a bit of a dim picture when it comes to how it will affect the insurance industry, she said.
“The highest risk is that drivers could lose their licenses due to speed fines (even minor ones) which could potentially mean that their existing motor policies will not respond or that they will not be able to get motor insurance.
“We already have a very high percentage of uninsured vehicles on the road. This will increase uninsured vehicles on the road and will also have a severe impact on the recovery process after an accident.”
To further compound matters, the repossession of driver’s licenses would cause driver’s claims and cover to be forfeited, Colman said.
“Based on current policy wording, cover will not exist if a driver does not have a valid driver’s license. It will also be very difficult for insurance companies to waive this requirement as it is law to have a valid driver’s license,” she said.