FANews
FANews
RELATED CATEGORIES
SUB CATEGORIES Featured Story |  Straight Talk |  The Stage | 

VW owners left out in the cold

26 October 2007 Gareth Stokes

Earlier this week, Hollard Insurance started a trend which will have many vehicle owners quivering in their proverbial boots. The insurance company announced that they would no longer provide insurance cover on certain Volkswagen passenger vehicles speci

The move is in response to the high number of reported motor vehicle thefts of the Citi Golf.  Our guess is that Hollard has decided it is no longer economically viable to insure the vehicle. After all, the only alternative to scrapping cover totally is to hike premiums in line with the risk and with the Citi Golf not being the most expensive motor vehicle it was probably difficult to push insurance premiums much higher.

Santam joins the party

A couple of days after the Hollard announcement, Santam weighed in with provisions of their own. They will continue insuring the vehicle; but will require all Citi Golf owners to fit their vehicles with an approved tracking device. This is likely to add in the region of R200 per month to drivers expense budgets.

Manager of underwriting at Santam, Herman de Meyer said "Santam is aware that Citi Golf vehicles pose a high theft risk and as such we have decided to help our clients protect their vehicles by requesting the installation of a tracking device." He went on to say that, as from 1 October 2007, all Citi Golf and similar models have to be fitted with a tracking system. This requirement applies to new clients as well as to new items on existing policies.

Although the fitment of these devices does not act as a deterrent to potential motor vehicle thieves, a tracking device assists in the recovery of stolen vehicles, and thus limits the loss to the insurer in the event of a theft.

Overwhelming numbers

Motor vehicle insurers are facing a number of challenges in the domestic environment at the moment. Apart from increasing numbers of thefts and hijackings, they also face rising costs of part replacements, higher number of vehicles on the roads, deteriorating road conditions and a larger number of inexperienced drivers. All these push premiums higher and make it more difficult to maintain margins in a competitive business.

Unfortunately the Citi Golf is extremely popular with car thieves. And in South Africa there is no shortage of incidents to keep insurers on their toes. Crime statistics show a massive 86, 298 incidents of motor theft in the 2006/2007 year with car hijackings reaching an undesirable 13, 599 cases.

Santam seems to have taken the opportunity to follow Hollard's example and force its policyholders to take out additional anti-theft measures. Will other industry players follow the example set by Hollard and Santam?

Other industry views

We spoke to Zurich personal lines to find out what they thought about the matter. The first question we put to them is whether they would follow Hollard and Santam in stopping insurance cover on certain motor vehicle lines. There response was a definite no. "Vehicles with a known history of, for example, theft and hijack are rated accordingly as are known problem areas."

The company also indicated they were unlikely to make a similar sweeping policy change in the future with some caution thrown in: "We do not believe in jeopardising the insured where underwriting measures can be taken. This does not however exclude our refusal to provide cover on a specific vehicle which does not meet our general underwriting criteria."

Zurich believes part of the problem with the local motor insurance industry is the high number of vehicle owners who have no insurance whatsoever - "a high proportion of South African vehicle owners do not trouble to buy insurance of any description." And although the Road Accident Fund is under severe financial pressure, it remains the coverall for the countrys uninsured. "There is no legal obligation to buy insurance. Road Accident Fund (RAF) cover is provided by means of a fuel levy," says Zurich.

Editor's thoughts:
The high number of vehicle thefts and hijackings mean that insurers are under great pains to protect their businesses. Obviously some steps have to be taken to ensure that premiums accurately reflect the levels of risk inherent in a particular insured category. Would it have been more appropriate for Hollard to simply adjust premiums on the affected models? Send your comments to
gareth@fanews.co.za


 

Quick Polls

QUESTION

How confident are you that insurers treat policyholders fairly, according to the Treating Customers Fairly (TCF) principles?

ANSWER

Very confident, insurers prioritise fair treatment
Somewhat confident, but improvements are needed
Not confident, there are significant issues with fair treatment
fanews magazine
FAnews June 2024 Get the latest issue of FAnews

This month's headlines

Understanding prescription in claims for professional negligence
Climate change… the single biggest risk facing insurers
Insuring the unpredictable: 2024 global election risks
Financial advice crucial as clients’ Life policy premiums rise sharply
Guiding clients through the Two-Pot Retirement System
There is diversification, and true diversification – choose wisely
Decoding the shift in investment patterns
Subscribe now