Mandatory Third-Party Motor Insurance in South Africa: A Call for Responsible Reform

South Africa’s roads are among the busiest and most dangerous in the world. Every year, thousands of lives are lost and countless more are affected by road accidents, many of which result in severe injuries and significant financial distress to the road users.

Despite this alarming reality, South Africa remains one of the few major economies where third-party motor insurance is not mandatory.

Understanding Third Party Insurance
Third-party motor insurance is a basic form of cover that protects victims of road accidents. It ensures that those who suffer injury, death, or property loss are compensated, regardless of the at-fault party’s financial means. In many countries, third-party motor insurance is a legal requirement and compulsory for all vehicle owners, forming the foundation of a responsible and fair motoring environment.

The South African Context
Currently, the Road Accident Fund (RAF) provides some compensation to victims of road accidents. However, the RAF is severely strained, facing significant financial challenges and backlogs. Uninsured drivers often escape financial accountability, leaving victims to bear the brunt of costs. Mandatory third-party insurance must be seen as the basis for responsible vehicle ownership.

The Benefits of Mandatory Third-Party Motor Insurance
Mandatory third-party insurance would guarantee that victims of accidents receive the compensation they need, irrespective of the financial status of the at-fault driver. This provides a better protection for road users.

Mandatory third-party motor insurance promotes a culture of accountability and financial responsibility among motorists, reducing the burden on the state.

Mandatory third-party motor insurance would significantly decrease the number of uninsured vehicles on roads, fostering a safer and more secure environment for motorists.
Mandatory third-party motor insurance will help prevent families from falling into poverty due to unforeseen road tragedies by ensuring accident victims are not left destitute. This provides economic and social stability for motorists.

Mandatory insurance will stimulate growth and innovation.
A mandatory third-party insurance system would stimulate growth and innovation in the insurance sector, leading to more affordable and accessible products for consumers.

Policymakers must prioritise insurance industry revitalisation and provide support to the short-term insurance industry that is currently experiencing a “hard market”. If third party motor insurance is made mandatory, an untapped market of the 65% uninsured vehicles on South African roads would have been opened for access by insurers and brokers.

The advent of technology and innovation will enable strategic implementation and distribution of mandatory third-party motor insurance to motorists.

Step up and lobby for mandatory third-party motor insurance.
A panel discussion on the Startup 20: Advancing MSME Growth Through Innovation and Global Collaboration on CNBCA Africa in Sandton on the 23rd of July 2025 brought together, founders, investors and innovators for a discussion unpacking how South African startups in AI, Fintech and Insurtech are thriving and surviving despite the odds.

Responding to a question from Abbot Pfukwa: CEO of Octomate Education on whether the Fintech’s, Insurtech and insurance industry players have done enough to lobby for mandatory insurance, Matthew Smith: Co-founder of Pineapple-a leading Insurtech startup, asserted that industry players must intensify lobbying for mandatory third-party motor insurance. It is in the insurers best interest to have mandatory third-party motor insurance.

Matthew expounded, “data has shown that areas that are “insurance rich”, would experience an economic boom, after a catastrophe. The liquidity from insurance claim payouts reassures rebuilding as claimants get back on their feet. Without insurance, the process of rebuilding is adversely affected. Whether it's on a micro scale for example someone having an accident and losing their ability to participate in the economy or on a macroscale, such as a big destructive event, if there is no insurance cover, you lose the ability to mend quickly. There is a case for mandatory third-party motor insurance.

Abbot Pfukwa encouraged Fintech’s, Insurtech’s and insurance industry bodies to use data generated over the past years to continue lobbying for mandatory third-party insurance with policymakers. The FinTech’s, Insurtech’s and insurance bodies must use data-driven lobbying to continue motivating for mandatory third-party motor insurance. The industry must persevere and not lose hope. In fact, a mandatory third-party insurance system is long overdue in South Africa.

Insurtech is transforming how people access and manage insurance.
Commenting on the power of innovation, Matthew Smith, said, Insurtech is transforming how people access and manage insurance. With digital platforms, insurers and brokers can streamline the purchase process, improve transparency, and reduce costs. With mandatory third-party insurance, technology will enable accessibility to a wider audience, addressing inclusivity.

Startup 20: Advancing MSME Growth Through Innovation and Global Collaboration
Policymakers must consider to intentionally use mandatory third-party motor insurance to grow the MSME in the insurance space and address transformation. Mandatory third-party insurance will advance the growth of MSME such as brokers if they leverage innovation. This will unlock the motor insurance market, opening a big market for the MSME to thrive.

Insurers will implement smart products above the mandatory cover, personalized to meet the specific requirements. Insurers will be able to incentivize safer driving behaviours benefiting individual policyholders but also contributing to overall road safety.

A mandatory third-party insurance regime may face massive resistance.
Despite the benefits, mandatory third-party insurance may face challenges. Enforcing it, maybe the first hurdle. A mandatory third-party insurance regime may face massive resistance from the already financially burdened motorists. Some may argue that mandatory third-party insurance would impose an additional financial burden on motorists, but this concern is unravelled by repurposing the fuel levy which funds the Road Accident Fund. Motorists may reposition the present fuel levy towards mandatory third-party insurance cover. The insurance sector in South Africa is well established and able to handle motor insurance risks.

Reflection.
“Now is time for a paradigm shift: the introduction of mandatory third-party motor insurance. Mandatory third-party insurance must not be viewed as a regulatory requirement; it must be seen as a necessary social contract that provides victims of road accidents with recourse. Education and knowledge sharing between policymakers, motorists and the insurance sector around the topic is crucial, so all stakeholders have a sound understanding of both the legal and moral obligations that come with driving a vehicle on the road.

Octomate Education is promoting insurance literacy. We believe that industry players, professional bodies and policymakers must finalise on this issue. The issue has been left hanging for too long. Educational programs are vital in bridging the knowledge gap between motorists who may be opposed to mandatory third-party cover. Mandatory insurance will force motorists to think of the necessity for insurance cover. Octomate Education’s contribution on the matter includes demystifying the process of mandatory third-party motor insurance and empowering policymakers and motorists to make informed decisions”: Abbot Pfukwa