Motor insurance

Guarding against accident claims

Source: You and Your Rights>

Although regrettable, motor accidents are commonplace since all drivers – loath as they might be to admit it – at some time or another exercise less care on the road than they should.

In many cases, careless drivers have to pay large sums of money for injuries they cause to persons and property.

Insurance is designed to cater for these risks. It works on the principle that in exchange for a monthly or annual lump sum payment (the premium), an insurer will pay compensation for loss or injury for which the insured driver may be liable.

Note, however, that there is a difference between what is commonly known as ‘third party’ insurance and other insurance cover.

‘Third party’ insurance

In terms of the Multilateral Motor Vehicle Accidents Fund Act 93 of 1989, every motor vehicle on the road is covered by ‘third party’ insurance, as a form of protection for other road-users.

The date of an accident decides which insurance company acts as agent for the Multilateral Motor Vehicle Accidents Fund (MMF) in regard to that particular accident. Motorists do not pay premiums in order to get cover; the MMF is funded by a levy added to the price of petrol.

You must take out additional temporary cover if you intend participating in a motor rally on public roads.

The MMF, a state body, is empowered to pay compensation for loss or damage suffered as the result of injuries or death caused by a vehicle. In cases in which the driver could not be identified (such as in a hit-and-run accident) the claim must be lodged directly with the MMF and not with any insurance company.

Bear in mind, however, that the MMF exists solely for the protection of people. Claims arising out of damage to property will not be met by this accident fund. For this reason, most drivers feel that MMF alone does not provide them with sufficient protection.

Warning – The accident insurance system may change

In 1996 the government proposed in a white paper that the Multilateral Motor Vehicle Accidents Fund Act be replaced. Among the proposals are that a ‘no-fault’ system of third party accident insurance be introduced so that claims no longer have to be referred to the courts. This is similar to the system of workers’ compensation. However, the proposed new Act would limit the size of claims and introduce strict time limits for making claims.

Warning – What is covered by ‘Third party’ insurance

The authorised insurer must compensate any person (known as the ‘third party’) for any loss or damage that the third party suffers in a motor vehicle accident caused by the negligence or other unlawful act of the driver of the vehicle, or its owner, or the owner’s servant who drove it in the execution of duty. The third party must be compensated for:

  • The death of, or any bodily injury to, any other person;
  • Any bodily injury to himself or herself.

The Multilateral Motor Vehicle Accidents Fund Act, 1989, does not, however, provide for the payment of compensation for damages to property or to the driver of the
insured vehicle. Nor does it cover:

  • A passenger conveyed for reward on a motorcycle;
  • Passengers in the insured vehicle who are members of the driver’s household or are responsible in law for the maintenance of the driver. This means that they cannot claim from the third-party insurer of the vehicle in which they traveled. If another vehicle was involved in the accident and the negligence of the person who drove it contributed to the accident, they can claim from that vehicle’s third-party insurer.

The Act also limits the compensation certain categories of people can claim to R25000. These include:

  •  member of a lift club claiming from the third-party insurer of the vehicle used by the lift club;
  • A passenger conveyed by the owner of the insured vehicle in the course of the owner’s business;
  • A passenger conveyed in the course of his or her employment with the driver or owner of the vehicle;
  • A passenger (not a motorcycle passenger who has no claim) conveyed for reward. Legal costs incurred in recovering any of the amounts are not included in the R25000.

The insurer is not obliged to pay compensation to an injured person who:

  • Unreasonably refuses or fails to undergo any medical examination by any medical practitioner designated by the insurer (the insurer must pay the costs of medical examinations);
  • Refuses to give the insurer – at the insurer’s request and cost – copies of all medical reports that relate to the claim for compensation;
  • Refuses to allow the insurer to inspect records relating to the claimant in the possession of a medical practitioner or hospital.

The insurer can also refuse to pay if the claim is not instituted by the claimant or by an attorney or a certain category of persons in the employ of, or representing, the state or other specified bodies on behalf of the claimant.

Choosing a policy

Insurance companies issue three main types of motor-policies:

BALANCE-OF-THIRD-PARTY ONLY This policy covers damage to the property of a third party as well as compensation for injuries sustained by passengers in your own car to the extent that they are not covered by the MMF or beyond the limitations imposed by the MMF.

The maximum amount of compensation payable to the third party is stipulated in the policy. The property of the third party is not confined to his or her motor vehicle but includes immovable property, such as walls, buildings or windows.

There is a limit to the amount of compensation that may be claimed by your passenger – usually about R25000, and this will be reduced by any amount paid by the MMF.

BALANCE-OF-THIRD-PARTY, FIRE AND THEFT This combines the benefits of the two types already described, but no compensation is made for damage to your own car (for which you require a comprehensive policy).

These two policies are available at relatively low cost and are particularly suitable if your own car is not worth a great deal of money or if you are able to meet any extra claims from your own resources.

COMPREHENSIVE This policy provides all the benefits of balance-of-third-party, fire and theft insurance but also provides cover against other risks. The premiums are higher, but you are compensated for damage caused to your car whether through your own negligence or not. Loss through depreciation and mechanical or electrical breakdowns, damage to tyres by application of brakes or by road punctures, cuts or bursts and damage to springs through unevenness of road surfaces are not covered.

Fringe benefits, such as the replacement of a broken windscreen at a reduced price, may well be written into a comprehensive policy. Many, but not all comprehensive policies make provision for the payment of medical expenses for injuries caused by ‘external violent and visible means’ up to a limit of about R500 for each occupant of the car, including the driver, with a possible overall maximum compensation per accident.

Most comprehensive policies cover towing expenses from the scene of an accident. The contents of your car are not covered. Your comprehensive policy will list certain exceptions or circumstances under which it will not pay compensation, such as when the car was being driven, with your consent, by a person not in possession of a driving licence or when you are driving under the influence of intoxicating liquor or a narcotic drug.

Your comprehensive policy will also not compensate you for damage or injury suffered while your car is being used to compete in a motor rally or other motor-sport competition. Most comprehensive policies contain a clause stating that compensation will not be made for loss or damage caused while the car was being used for ‘hire or reward’. If your car is a ‘lift club vehicle’ (that is, you are not making any financial profit out of it), your insurance premium will not be increased.

Proposal form

Before you are issued with an insurance policy, the insurer will ask you to complete a proposal form, giving details about yourself, your driving record, the motor vehicle you intend to use, for what purpose it is to be used and other people who are likely to drive it. From this information the insurer assesses the risk it is taking and calculates the premium it will charge. It is important, therefore, to fill in the form accurately.

An insurer may decide to ‘load’ the policy by charging higher than normal premiums if it considers that there is a higher than normal risk involved, or it may charge an extra excess.

A policy can usually be transferred to a new vehicle should you dispose of your vehicle and buy another (provided you stay with the company from which you took out your first policy). Premium adjustments will have to be made if there is a difference in value between the two vehicles or if the new one is classed as a sports car or custom-built car.

Some policies will indemnify you when you are driving a motor vehicle that does not belong to you.

Getting the most from a no-claim bonus

If you have not claimed against your comprehensive insurance policy for at least a year, you will generally be entitled to a no-claim bonus or rebate. This applies whether you pay your premium as a lump sum or by monthly or quarterly installments during the year.

The no-claim bonus is a discount or rebate on the basic premium. A typical no-claim bonus may amount to 40 per cent of the original basic premium after four years.

Before you commit yourself to a particular policy or company, find out if a single claim will nullify several years’ no-claim bonuses. This may, for example, be the practice of insurers offering the highest no-claim bonuses. Find out, too, if your existing no-claim bonus will be recognised by the new insurer.

You may lose part or your entire rebate if you claim against the basic policy for injury or damage for which you were wholly or partly to blame, or for which no blame can be apportioned to any party.

Most insurers will not cancel your entire rebate if you make a single claim, but will drop you back a step or two on their scale of rebates.

TO CLAIM OR NOT TO CLAIM When you claim on your insurance policy, you will either lose your no-claim bonus or have it reduced, meaning that the following year your premium will be higher.

Insurers grant no-claim bonuses partly as a reward to you for not having made a claim and partly to discourage you from making small claims. Often, claiming for a relatively small amount will reduce your no-claim bonus by more than you stand to gain from the claim.

Say, for instance, that your no-claim bonus has reduced your annual premium from R200 to R120: if, after an accident, you submit a claim for R50 for repairs to your car, you could lose your R80 no-claim bonus and have to pay the full R200 premium the following year. You would, therefore, save money by paying the R50 for repairs out of your own pocket.

Even if you decide to preserve your no-claim bonus by paying for repairs yourself, you must (in terms of your policy) inform the company of the accident.

If you that you do not intend to claim ‘at this stage’, this leaves you the option of claiming later if the costs of repair are excessive.

Warning – Who is a ‘Third Party’

Lawyers call the insurance company the first party to a contract of insurance and the owner of the vehicle the second party. With the usual type of insurance policy it is the person insured who would claim under his or her contract against the first party. In this instance, however, a person who is not a party of the insurance contract, but is a third party, claims directly from the insurer.

The cost of insurance

How much you will pay for your insurance depends on how much of a risk you are to the insurer and the amount of cover you require. Because different insurers use different methods of assessing risk, you will receive varying premium quotations. However, all insurers take into account some, or all, of the following factors when determining a premium:

  • Your age;
  • Your driving record;
  • Your job;
  • To what use the car will be put (for example, business or domestic);
  • The type of car;
  • Where it is garaged;
  • What it is worth;
  • Whether it has an immobiliser or alarm fitted;
  • The number of motor vehicles in the area in which it will principally be used.

It may seem unfair in individual cases to make some age groups pay more than others, but insurers know from experience that the most accident-prone drivers are under the age of 25 and that the safest are the middle-aged.

WOMEN DRIVERS Some companies offer reduced premiums to women drivers. It may therefore be a good idea for women drivers to investigate the terms of these policies.

CUTTING THE COST If, after completing a proposal form, you find that you cannot afford the premium quoted, the insurer will usually reduce the charge if you agree to an increase in the first amount payable by you in the event of a claim (a ‘voluntary excess’). This first amount (the excess) can be fixed at an agreed sum (depending on the value of the car).

A driver under 25 years of age will pay a higher amount, as the risk is deemed greater. If you agree to increase the excess on any claim, you can expect your premium to be reduced (the amount depending on the insurer).

This means that the insurer will not have to pay for any minor claims where the cost of repairs amounts to less than the agreed excess.

No-claim bonuses

The most effective – though not the quickest – way to reduce your premium without restricting your insurance cover is by building up a no-claim bonus. Insurers reduce premiums progressively by a discount calculated on the number of years the insurance has been in force without a claim having been made either by or against the policyholder.

A single claim rarely nullifies several years’ no-claim bonuses and the number of years that you may be pushed down the discount scale varies from insurer to insurer. All insurers allow you to claim for a shattered windscreen without forfeiting your no-claim bonus.

Renewing a policy

Most motor insurance policies are annual contracts that have to be renewed. If you have not received a renewal notice two weeks before your policy expires, contact your insurer or broker to inquire about it. Insist on being issued with the insurer’s printed notice that reflects your no-claim bonus, especially if you decide to change insurers. Should your insurer go out of business, you would be taking a serious risk by using your motor vehicle before arranging alternative cover.

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