While many objections have been put forward regarding the new Administrative Adjudication of Road Traffic Offenses Act (AARTO Act) signed into law by President Cyril Ramaphosa on 13 August 2019, there are additional hidden problems that could affect truckers from an insurance perspective.
To get a handle on this, Yolande Van Niekerk, CEO of Ibiliti Underwriting Managers based in Fourways, spells out for our readers some of the considerations that many short-term insurance companies have to consider around the implications of the Act. There are also implications for drivers so it is worthwhile to take note of what she says – that is, after you’ve taken your eyes off her picture (…had to get that in).
Impact on the industry as a whole
The AARTO Act will not only impact on how the insurance industry underwrites and issues policies but the claims processes may also change. Unfortunately therefore, the AARTO Act could potentially impact the insurance sector as well as drivers negatively. Among the impacts are:
- Drivers may not be able to get insurance, even if they have only committed minor parking offences such as parking fines.
- More uninsured vehicles may be on the road as more people are likely to take a chance to drive without a licence.
- The insurance sector could get smaller as the insurance of vehicles is a big part of the sector in South Africa. In turn, this may lead to job losses.
Effect of demerits
There are some infringements, among others, which come close to the maximum of 12 demerits and significantly affect insurance cover:
- Exceeding the speed limit (minus 2 to 4 points).
- Exceeding the speed limit by 40km/h (minus 6 point).
- Driving under the influence (minus 6 points).
- Accumulated 12 points because of lousy driver behaviour on the roads (Licence suspended for 3 months).
- Driving without a licence or Professional Driving Permit (PrDP) or operator card (No insurance cover).
Tips when licence is suspended
Here are Van Niekerk’s tips for policyholders if their licence gets suspended.
- Notify your insurance company immediately. Your policy may not pay out if you drive unlicensed and have an accident.
- Adjust the wording of your policy (if allowed) and nominate another person to drive your vehicle.
- If your licence gets suspended, do not cancel your policy as your vehicle remains covered for other insured perils. You can arrange limited cover for fire and theft while you wait for your licence to be reinstated.
Effect on policy underwriting
According to Van Niekerk, it is perhaps alarmist to say in policy underwriting: “No licence! No insurance!” However, she stresses that the new AARTO Act will no doubt impact the underwriting and wording of insurance policies in the future. AARTO has a profound effect on how insurers may view new applications. How so?
- Firstly, clients must disclose suspended licenses. Insurers consider this as material information and non-disclosure could lead to rejection of claims. However, such disclosure can be an advantage to the insurance industry as it may lead to a reduction in fraudulent claims.
- Secondly, we predict it to be conditional before the issue of any insurance policy to obtain the client’s consent to access their AARTO information to make sure that their licence has not been suspended. Also, the insurer can then better determine whether they can sign on a client, especially if their licence has been suspended several times. Besides, the insurer must then investigate the reasons for the suspension of the licence. For example, several small speeding or parking fines will probably not be considered as dangerous as driving under the influence.
- However, if a client’s licence gets suspended and they must retake it, there may be no or less cover until due process is complete. The driver may have no cover until due process has been completed to reinstate their licence.
Effect on claims
From a claims perspective, insurers may implement a verification system to ensure that licences get checked quickly and accurately. The cost to verify licences will, in all likelihood, be costed towards the insurer’s account.
Any good news?
There is some good news among the bad as, according to Van Niekerk, AARTO also holds many benefits for the insurance sector as well as for drivers:
- Insurers could reward law-abiding drivers by discounting their premiums.
- Underwriters may be able to assess the risk of a prospective insured before they sign a contract. They would require a prospective client to declare at inception or during renewal, their demerit status and history over three to six months or even longer.
- Insurers can determine if a prospective insured is a high-risk driver by considering their demerit status for purposes of coverage and for charging the appropriate premium.
In conclusion, Van Niekerk says AARTO is a reminder that the world keeps changing and to stay in the game, it is essential to adapt with ease and agility to new legislation and other disruptions. “Instead of fighting the old, it is more fruitful to embrace the new,” she reckons.
To do so, insurers must find out how new legislation will impact the insurance sector. “As for the insured, open disclosure to their insurers enables a mutually beneficial resolution to AARTO related implications,” she says.