A fuel-price levy is the best way to fund the government’s proposed introduction of compulsory basic insurance on motor vehicles, according to some analysts and stakeholders.
However, the SA Insurance Association and Automobile Association are opposed to the premium being collected by way of a fuel levy.
Transport Minister Sibusiso Ndebele confirmed recently that compulsory basic damage insurance on vehicles was being considered by the government.
Good idea but…
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Viviene Pearson, Saia’s manager for motor insurance, said the association was supportive of the proposed insurance in principle but was still considering the different options and was therefore not in a position to commit to a specific management or funding model.
However, Pearson said Saia believed that allowing the insurance industry to offer this product on a free market basis would be ideal as all the expertise and know-how in the industry would offer the best chance to make this work efficiently.
“It is quite possible the collection of an annual premium at the stage of taking out and/or renewing the licence of a vehicle will be the most efficient and practical way of collecting the necessary premium for such a product.”
AA spokesman Gary Ronald believed such a scheme should be investigated because it was likely to make insurance more affordable. But the AA was opposed to it being funded by a fuel levy. It believed each insurer should be allowed to come up with its own insurance product.
Levy to fund basic insurance?
Motor industry analyst and director of Econometrix Tony Twine said the most secure and even-handed way of securing the premium income for such insurance was probably through a levy on the petrol price because it took into account the amount a motorist travelled and more expensive and older, less safe, cars would tend to use more petrol.
National Association of Automobile Manufacturers of SA executive director Nico Vermeulen and Retail Motor Industry Organisation chief executive Jeff Osborne both supported the fuel levy as the premium collection point. Vermeulen said this would make the insurance more efficient but stressed the need for extensive consultation with the insurance industry.
Osborne said the RMI had advocated the introduction of compulsory motor vehicle insurance for years and was also pushing for compulsory roadworthy tests because it believed the general state of vehicles contributed to accidents.
He added that South Africa was one of the few civilised countries in the world where compulsory motor vehicle insurance did not exist and where a person could buy a car and drive it for 20 years without having it tested again for roadworthiness unless it changed ownership.
Leigh Friend, Johannesburg regional manager for MUA Insurance and a member of Saia’s workgroup on compulsory third party insurance, said such a scheme was crucial in South Africa where very few motorists currently insured their vehicles. Research suggested that only about 35 percent of the 9.5 million vehicles on the roads were insured, she said.