Reviving the short-term motor book

Gareth Stokes, FAnews Online Editor

South Africa’s short-term insurers all agree drastic action is required to address the commercial viability of their motor insurance books. They will continue to bleed profit unless they find a balance between premium and cost, to ensure the long-term sustainability of their respective businesses. The latest salvo in the war for short-term insurance profitability was fired by the South African Insurance Association (SAIA), an organisation representing the interests of short-term insurance members across South Africa.

“For the past year or so the motor insurance industry and the motor insurance business class has come under quite a bit of pressure, with most of our member companies in this area experiencing a lot of difficulty,” said Viviene Pearson, recently appointed as SAIA Manager: Motor. The position – complete with support staff – was created shortly after the SAIA board adopted a comprehensive strategy to address issues in the short-term motor insurance space.

SAIA motor strategy objectives

We spoke to Pearson to find out how SAIA will go about moulding the short-term motor insurance environment. “The strategy has two legs – first to facilitate the provision of affordable comprehensive vehicle insurance – and second to contribute to safe road practice,” she said. Comprehensive vehicle insurance should be the de facto standard for vehicle owners on South African roads, but it has to be affordable to be sustainable. Safe road practice benefits both the motor insurance industry and the country as a whole. Every road user including drivers, motorcyclists, cyclists and pedestrians will benefit from road safety initiatives.

To achieve these objectives SAIA will leverage its core competencies in areas such as the identification and quantification of risk and cost factors, the use of technology and the event management chain, and relationships. The strategy also ushers in a shift in SAIA thinking. “In the past we reacted to things by undertaking ad hoc projects as required,” observed Pearson. “Going forward we will take a proactive stance!” The organisation will drive its comprehensive strategy forward with as much support from industry stakeholders as possible. This strategy houses seven key components.

Key factors for a motor insurance revival

The first component of the strategy focuses on the driver. “This includes everybody who uses our roads including the pedestrian and drivers – whether insured or not,” said Pearson. She hopes to establish a committee to address this part of the strategy within the next month. Areas that need to be addressed under this category include: levels of insurance, compulsory third party insurance, drivers licenses and training. It’s unacceptable that two thirds of the vehicles on our road remain uninsured. The second component centres on the vehicle. SAIA will look at issues around roadworthiness of vehicles, licensing of vehicles and even the cost of repairs to vehicles. “We will definitely look at ways to bring the cost of vehicle repairs down,” said Pearson. Motor insurers have been hard hit by the combination of poor road safety and an escalation in the cost of repairs.

SAIA’s third motor strategy priority deals with vehicle crime. Contrary to belief vehicle crime isn’t a major contributor to motor vehicle claims. Pearson said there was opportunity to link this aspect of the new strategy to existing projects at Business against Crime South Africa (BAC) and the Insurance Crime Bureau (ICB). Ongoing initiatives include vehicle repatriation and stricter border controls.

Getting government on board

SAIA won’t be able to tackle each of these components immediately. The fourth component centres on roads and the state of the country’s road infrastructure. Although the physical repair of road infrastructure is out of SAIA’s hands, Pearson said the group would address the issue over the longer-term by lobbying government and building appropriate relationship wherever possible. The fifth component of SAIA’s motor strategy is the supply chain, including panel beaters, tow truckers, glass fitment centres, service centres and any other suppliers that work on vehicles. “This is one of the most challenging areas and will require a great deal of attention,” said Pearson.

A sixth component deals with data and technology and information. The organisation will focus on aspects such as Aarto’s driver licence demerit system etc. There are plenty of questions that need to be answered in this category. For example: How will demerit points affect insurance? And finally, the strategy calls for ongoing effort to build industry relationships. Relationships are core to what SAIA does, said Pearson. Building strong relationships is at the heart of SAIA’s motor strategy.

Editor’s thoughts: Viviene Pearson has her work cut out as SAIA Manager: Motor. She will have to get industry stakeholders to sit around the table and work toward the collective goals of extending comprehensive motor insurance penetration and improving road safety. Do you think SAIA is the right organisation to drive this vision? Add your comment below, or send it to gareth@fanews.co.za