Exceeded the speed limit? Minus 2 to 4 points.
Exceeded the speed limit by 40km/h? Minus 6 points.
Drove under the influence? Minus 6 points.
Accumulated 12 points because of bad behaviour on the roads? Licence suspended for 3 months.
No licence (or professional driving permit or operator card), no insurance.
POLICY UNDERWRITING AFFECTED
OK, perhaps not as harsh as no licence, no insurance. But the new AARTO bill will no doubt impact the underwriting and wording of insurance policies in future.
In fact, I believe that it will have a profound effect on the way that insurers view new applications.
Firstly, clients must disclose whether they licence has been suspended. Insurers will regard this as material information and non-disclosure could lead to non-payment of claims. This will definitely be to the advantage of the insurance industry as it will lead to a reduction in fraudulent claims.
Secondly, you will have to get the client’s consent to access their AARTO information and make sure that their licence has not been suspended before you issue the policy. Also, you will be able to determine whether you want this person as your client, especially if their licence has been suspended several times already.
In this second instance, we will investigate the reasons why the licence has been suspended. For example, several small speeding or parking fines will probably not be regarded as serious as driving under the influence, not stopping at a stop street or going through a red traffic light.
But, if a client’s licence has been suspended and they have to retake it, there will be no cover until the process has been completed.
EFFECT ON CLAIMS
From a claims perspective, we will have to implement a verification system to ensure that licenses can be checked quickly and accurately. The cost to verify licences will probably be for the insurer’s account.
OTHER IMPACTS ON THE INDUSTRY
Not only the way we underwrite and issue policies, and claims processes will have to change, but AARTO could have potentially negative impacts on the insurance industry.
- Drivers will not be able to get insurance, even if they only committed minor (parking fines) offences.
- There will be more uninsured vehicles on the road as people will take a chance to drive without a licence.
- The insurance industry could get smaller as the insurance of vehicles is a big part of the industry in South Africa, which in turn could lead to job losses.
IS THERE ANY GOOD NEWS?
Yes, indeed! AARTO also holds many benefits for the insurance sector.
- Insurers could reward law-abiding drivers in that insurers will discount their premiums.
- Underwriters will be able to assess the risk of a prospective insured before they sign a contract. They would require a person to declare their demerit status and history over three to six months or longer at inception or during renewal.
- Insurers can determine if a prospective insured is a high-risk driver by having regard to their demerit status for purposes of coverage and charging the appropriate premium.
SO, WHAT IF MY LICENCE GETS SUSPENDED?
Policyholders must make sure they know what to do in the case of their licence being suspended. Here are our top tips:
- Notify your insurance company immediately. Your policy will not pay out if you drive around unlicensed and have an accident.
- Adjust the wording of your policy (if allowed) and nominate another person to drive your vehicle.
- If your license gets suspended, do not cancel your policy as your vehicle will still be covered for other insured perils. You can arrange limited cover for fire and theft while you wait for you licence to be reinstated.
The world keeps on changing and to stay in the game it is essential that we adapt with ease and agility to new legislation and other disruptions. Instead of fighting the old, let’s embrace the new.
How do you think the new legislation will impact the insurance industry?
We would love to hear your thoughts in the comments below.