Many South Africans is driving without short term insurance
Insurance terms are ended once vehicle is paid of.
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The National Association of Automobile Manufacturers in South Africa (NAAMSA)
said that the number of new cars purchased in July 2009 was only 34,503,
compared to over 12,000 more registered in the same month last year.
These numbers mean that many South Africans have continued to drive their
ageing vehicles after settling the full price with lending institutions.
While they were still paying off on their cars, these owners were required to
pay car insurance but once the debt has been paid, the insurance period ends and
many owners - knowingly or unknowingly - continue to drive on the roads without
short term insurance.
"This poses a huge risk to both the motorist and the South African short term
insurance industry as people tend not to renew their insurance cover after their
finance arrangements have come to an end," said the technical and risk
specialist at Centriq Insurance, Pravin Pather.
"This is because the vehicle finance company no longer requires the vehicle
to be insured," he explained.
Because of the recession, combined with the escalating prices of short term
insurance, many car owners simply opt not to renew their policies.
"Price has become a very important consideration for short term insurance
clients as they struggle to pay their insurance premiums," it was noted in an
insurance survey commissioned by KMPG last year.
There are a number of other challenges facing the short term insurance
industry, including the poor condition of roads in South Africa, the number of
unlicensed and/or inexperienced drivers and the rising cost of car parts.
"Taking into account that the minimum average cost of repair following a
motor vehicle claim amounts to approximately R16,000 consumers simply cannot
afford not to have at least third party insurance," said Pather.
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