This is how South Africa’s new demerit system will hit your insurance

President Cyril Ramaphosa signed the Administrative Adjudication of Road Traffic Offences (Aarto) Act into law in August 2019, introducing a new demerit system for South African drivers,

In the wake of this new act, a number of insurance service providers have suggested that the bill might have harsh effects on the insurance industry – one of them being the suspension of motorist’s licenses that could most likely increase insurance premiums or excess for South African drivers in general.

The immediate concern for most motorists will be around how this new act affect their insurance premiums, says Old Mutual Insure’s Christelle Colman.

“The demerit system could potentially be linked to underwriting criteria as it does reflect driving behaviour.

“Drivers with a poor record on this system could face higher premiums but that would be at the discretion of each company,” she said.

She added that depending on how efficiently the bill is rolled out, the new law could also see good drivers benefit from better premiums with the bad drivers being penalised.

“The bill does, however, paint a bit of a dim picture when it comes to how it will affect the insurance industry,” Colman says.

“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,” she said.

“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/cover to be forfeited, she said.

“Based on current policy wording cover will not exist if a driver does not have a valid driver’s license,” she said.

“It will also be very difficult for insurance companies to waive this requirement as it is law to have a valid driver’s license.”

Colman said that Old Mutual Insure has already started with preparations for the implementation of the new bill and is currently reviewing their underwriting criteria to see what their approach will be.

Read: You could be forced to pay an extra R100 every time you get a traffic fine in South Africa

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This is how South Africa’s new demerit system will hit your insurance