Microdotting - A solution for the short-term industry?

The number of vehicle thefts in South Africa remains a significant risk and cost for consumers and insurers. Could microdotting be the solution?

The latest SAPS crime statistics show that in the 2009/2010 reporting period, 71 776 vehicles were stolen, and the number of carjackings totalled 13 902. The cost implications are enormous – estimated at around R9 billion each year.

But perhaps more concerning is the 12 000 recovered but unidentified vehicles, worth more than R1 billion, which - according to Business Against Crime South Africa (BACSA) - are destroyed annually by the SAPS. These vehicles could have been returned to the legal owners if they had been microdotted.

All-round solution?

Microdotting does offer solutions to many of the challenges vehicle crime poses in the insurance industry, says Vic Saunders, Divisional Director: Short-term Insurance at PSG Konsult. “From the client’s perspective, any measure than can prevent a loss is desirable, because the theft or hijacking of a vehicle is not only invasive and a huge inconvenience, the cost implications – from the excess to a shortfall on the vehicle finance settlement figure – are often significant. From an insurer and broker perspective, the high number of thefts and hijackings negatively impact claims ratios and increase costs.”

How effective is it?

Unlike the traditional identification on a vehicle - the VIN and/or chassis number, which is easily filed off and changed – criminals can never remove all of the 10 000 to 15 000 microdots - applied with an ultraviolet adhesive to a single vehicle. Each microdot carries a laser-etched VIN or personal identification number to identify the vehicle and, by implication, its owner. This makes it much more difficult for car thieves to relicense a vehicle under a new identity, or for the parts to be sold, or for the vehicle to be exported.

A study done by BACSA on a number of fully microdotted models found that the recovery rate for the microdotted models was 91%, against a rate of only 52% of non-microdotted models within the same class.

Practical insurance implications

The various stakeholders, working together to overcome the challenges around implementing and monitoring this new crime deterrent, could ensure that microdotting does become a solution. “Successful implementation and monitoring of microdotting as a national system will not only help reduce the number of thefts and hijackings, but recovered vehicles can be returned to their rightful owners. Ultimately this would lead to some cost recoveries for insurers, and perhaps even lower premiums for clients whose vehicles are microdotted,” comments Saunders.

“This success will depend on microdotting being affordable - and more importantly, compulsory - for everybody, either from an underwriting perspective or from a legal perspective. From an underwriting perspective, it must be considered that microdotting is not a preventative measure to theft, but rather a recovery model for losses incurred. Nevertheless, some insurers have started requesting microdotting on new personal lines content policies.”

Legal requirement?

Several motor manufacturers are marking all new vehicles with microdots. But this may soon be standard practice. Regulations in terms of the National Road Traffic Act, expected to be published soon, will make microdotting compulsory on all new vehicles from January 2011.

It may well be that consumers and the insurance industry will benefit from microdotting technology not as an insurance requirement, but as a legal requirement. Its efficacy in reducing theft and hijacking will certainly lead to more decisive action from insurers in supporting microdotting as a risk management measure to curb vehicle theft costs.