Short-term insurance association supports healthy competition in the vehicle security market

23 April 2010 South African Insurance Association (SAIA)

“The South African Insurance Association (SAIA) supports healthy competition, across all industries,” said SAIA Chief Executive Barry Scott.

This remark was made after the SAIA had taken note of the recent findings of the Competition Tribunal which reportedly had found that Netstar, Matrix Vehicle Tracking, and Tracker Network - representing over 90 percent of the industry - and the Vehicle Security Association of SA (VESA) contravened the Competition Act by setting standards which created barriers to entry, resulting in anti-competitive behaviour.

Although the SAIA cannot comment on the specific recent finding regarding some companies in the tracking industry, as it has not been privy to the detailed findings and was not approached by the Competitions Commission regarding this issue, the SAIA supports both healthy competition and quality products that will protect consumers and their assets.

“The SAIA is a representative body, and always attempt to act in good faith. Accordingly, we do not encourage our members to contravene any laws of our country, including the Competitions Act. We will however continue to support the development and enforcement of minimum standards as both a consumer protection and risk management mechanism, provided that this is done within the confines of competition policy,” Scott added.

“The requirement for suppliers to apply standards to their products is good for the consumer. This is why the SABS exists - imagine an environment where unsafe household electrical appliances were sold. Similarly, all vehicles sold have to comply with minimum standards, to ensure the safety of motorists.

“The application of minimum standards therefore ensures that products are effective and achieve the purpose for which they were developed, and ensures that the products are safe.

“When the electronic vehicle security market first opened up, there was an immediate plethora of products developed, most of which were totally ineffective, and many of which were unsafe. Motorists were often left stranded on the roadside due to the failure of the security product. We can all remember car alarms going off all night, mostly caused by false alarms. Many of these products also failed to prevent vehicle theft. For these reasons, the SAIA supported the formation of VESA, not as a deterrent to the development and distribution of effective products, but in order to protect the consumer against the fitment of ineffective and unsafe products,” Scott emphasized.

“The SAIA would like to see an environment where competition is encouraged, and at the same time consumers are protected and insurers’ risk is minimized. The risk that the insurance company accepts directly affects the premium the consumer pays - the higher the risk, the higher the premium. Managing risk is therefore also in the interest of the consumer where it matters most – the consumer’s pocket,” added Scott.

In addition, the insurance industry plays a prominent role in the fight against crime. At the time when the insurance industry first became involved in requiring vehicle security devices to be fitted, vehicle crime was escalating out of control. Since the SAIA involvement together with Business Against Crime and the relevant authorities as well as other relevant role players such as NAAMSA and VESA, vehicle crime has reduced on average by approximately 50%, and is now no longer the biggest challenge facing motor insurance.

“The SAIA does not have any role to play with regards to the commercial practises and/or business decisions of our members. SAIA members are individual companies that make their own underwriting decisions, and any decisions companies make regarding the encouragement to use specific service providers are made by the different companies themselves on an individual basis. Many factors will influence such decisions, including their own claims experience. It is, of course, the right of all companies to contract any service provider should this be deemed prudent,” Scott added.

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