Will this be the solution?

Danny Joffe

On 16 August, President Cyril Ramaphosa signed in the Administrative Adjudication of Road Traffic Offences (AARTO) Bill which will impose strict rules on motorists and a strict punitive system should they fail to comply with the rules. While AARTO may improve the safety on our roads when you look at it on paper, we all know that the reality is a different story. What impact will AARTO have on the insurance industry? FAnews spoke to Danny Joffe, Head of Legal at Hollard, to discuss this.

Major concerns

Joffe points out the big concern with this bill is that it will have no impact in bringing down the big issues on our roads. These include the high rate of fatalities and accidents caused by speeding, reckless and negligent driving and driving under the influence of alcohol. 

“Unfortunately, insurers see the results of these issues. The total lack of respect for the rules of the road has become a real issue. There is a feeling that offenders will not get caught. And even if they are caught, leniency will be applied in a lot of instances,” said Joffe. 

The concerns from an insurance perspective run deeper than non-compliance to the rules of the road. A driver who has their licence suspended becomes an obvious bad risk for insurers. 

“This will definitely be part of the underwriting process. Insurers already ask about traffic related convictions such as reckless and negligent driving and driving under the influence and if the driver’s license has been suspended. I believe if the driver’s license is suspended, it may not be so easy for that driver to get insurance in the future. If they do manage to get insurance, it will be at an expensive premium. It all depends on how consistently the Act is enforced,” said Joffe. 

The plot thickens 

On the surface, there are already a plethora of questions when it comes to the future application of AARTO. We asked Joffe reasonably simple questions regarding the impact on the insurance industry. His responses indicate that the fall out may be very complex. 

The first question we asked was whether a motorist with a suspended license forfeit their insurance cover? 

“There is already a provision in the insurance industry which states that no cover can be provided for any driver that does not hold a valid South African drivers licence. If the driver of the vehicle’s license is suspended, there will be no cover during the period of suspension,” said Joffe. 

We then asked whether a motorist with a suspended licence will be precluded from obtaining vehicle insurance from any other insurer once the licence is reinstated? 

“It will depend on the reasons for the suspension of the license. If it’s for a collection of small speeding or parking fines, I assume it will be very different to other violations such as driving under the influence or driving recklessly (overtaking on blind rises or solid lines or skipping a robot or stop street). It will depend on the violation,” said Joffe. 

Opening doors
AARTO may inadvertently open more doors when it comes to non-disclosure. This will arguably be the biggest impact on the insurance industry. When taking out cover with a new insurer, very few clients will openly admit to having their licence suspended, no matter the circumstances that led to the suspension. 

Is this possible increase in non-disclosure a legitimate concern?  

“We would need to get the client’s consent to access their AARTO information before we can go into the system and determine whether there were any suspensions of a potential client’s licence. It’s the same as the credit score and other data bases. If the client does not disclose the fact that his or her license was suspended and the insurer regarded it as material information, this will be treated as a material non-disclosure the same as failing to disclose previous claims or the security of where the vehicle is parked,” said Joffe. 

He added that the client then runs the risk of having the policy voided for non-disclosure and claims will not be paid out. 

What happens to drivers who have their licence suspended for three times and need to retake their learners and drivers licence tests. Will their AARTO history be considered when providing cover? Is their risk rating reset as if they are new drivers? 

“If a client needs to retake their license, there certainly will not be any cover until that process is complete. Underwriting systems have become very advanced with models being designed by actuaries. I believe that if a client has their license suspended this will be seen by underwriters as being material. Again, it will depend on how consistently the system is applied and how accurate the decisions will be. One will need to see how the punitive measures will be implemented before addressing this particular challenge,” said Joffe. 

Editor’s Thoughts:
The AARTO Bill hopes to encourage a culture of compliance. While this a noble gesture, which is desperately needed on the South African roads, the consistency of punitive measures needs to take centre stage. If this is stringently enforced, the impact on the insurance industry will be minimised. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.