Right from the outset I urge anybody reading this article to overlook any inferred points which could be viewed as exacerbating disputes and to keep in mind the objective is to stimulate debate about current and future trends in the transport insurance industry – nothing less, nothing more. What has risen to prominence of late is the debate on third party insurance covers, (TPCs), with Government contemplating on whether or not there should be a compulsory cover for TPC.
We have commented and will comment on the fact that in the transport industry, we believe current TPCs are, generally speaking, totally inadequate (many industry commentators have voiced the same concerns).Furthermore, what should be expanded on is activity within the motor insurance industry itself.
On the far extreme, we have some direct insurers whose business model sells comprehensive cover, However, their third party actions are deflected almost in totality. As an aside, note the hint of admiration that one can collect comprehensive premium on a sales pitch yet the proportion attributable to third party liability is neutralised. In the motor insurance industry, I reflect on a very cautious personal comment that it appears – because so many of the motor industry claims themselves are now handled by brokers, intermediaries and so forth – that to all intensive purposes we have entered an automatic process of industry deflection.
My point is that through evolution, the first point of reference is “denial’ then a litigation process or process of pressure to bear until the third party claim is resolved. So, while the motor industry evolves into this third party deflection, I and other commentators are increasingly concerned with the likelihood that from a truck insurer’s perspective, we will not only pick up the normal own damage liability but also be faced with the likelihood of an ever decreasing recoveries ratio. For example, I remind you of the Greyhound coach incident years back where a R10 000 bakkie “took out’ a Greyhound coach.
To continue this thought, the own damage liability for us is a quantum for every eventuality i.e. it is irrelevant the cause of the accident, we – the transport underwriter – will pay for the claim almost in totality. That status quo is unhealthy and non-sustainable. What I would like to see if we do address this compulsory TPC are the following objectives. We are supporters of compulsory TPCs for the motor industries, however:
‘¢ The government has proven through the roll out of the bus rapid transit system and the poor state of the Road Accident Fund that they don’t have the management capacity to run this fund or anything similar. It will have to be a public-private partnership with large motor insurance industry players involved otherwise it is doomed to fail.
‘¢ It is all very well having a “limit’ for this proposed compulsory third party cover but from the transport insurer’s recovery perspective, this would be negative. For example, say the liability limit is R50 000 and the claim is say, R750 000 and, under current market conditions, a recovery prospect. How can the transport insurer possibly get excited about entering a compulsory fund when the recovery prospects will be fairly “insignificant?
‘¢ I would much rather see the additional cover being purchased at license renewal, however, with the big caveat of it being a private industry initiative. In other words, adding this onto the licenses only to sink it into the RTMC or some other body, is a no go!
‘¢ There should, from the beginning, be a basic limit of TPC. The country cannot afford the total cost of road accidents so something has to be done – and urgently at that.
‘¢ An immediate improvement in the accountability in the third party insurance sector would be a good thing for a start. Furthermore, affordability of insurance is not a debate. It is a fundamental cost and moral responsibility of owning a vehicle to have insurance because I don’t believe our country can carry the “cost of carnage’ that we currently have!
If anybody wishes to continue this debate, we would welcome any views!
Writtehn by Chris Barry, CEO of HCV Underwriting Management
