Car Insurance Law
We would like to provide our vehicle owners and car insurance policyholders with a brief overview of the most important laws in the regulatory framework governing car insurance in South Africa. These laws include:
- Short-Term Insurance Act (Act 53 of 1998 as amended)
- Policy Holder Protection Rules (Short-term Insurance), 2004
- Financial Advisory Intermediary Service Act (Act 37 of 2002)
- Financial Services Ombud Schemes (Act 37 of 2004)
Introduction
The insurance sector in South Africa is governed mostly by statutory law through various acts promulgated by parliament. The industry is also specifically regulated by the Financial Services Board in terms of the legislation and regulations promulgated by parliament.
How does this affect the vehicle owner and which are the most important aspects in Car Insurance Law that the consumer needs to know?
We would like to provide a brief overview of the Car Insurance laws and how they impact on the rights of our car owners, consumers, financial service providers etc
Short Term Insurance Act 53 of 1998
The Short-term Insurance Act (amongst other things):
- Provides for the registration of short-term insurers.
- Control the activities and administration of short-term insurers and intermediaries.
- Prescribes financial requirements, solvency and liquidity.
- Regulates policies and business practices and offers policy holder protection.
- Regulates commissions, premium collection and claims handling.
Financial Advisory and Intermediary Services Act 37 of 2002
The objective of the FAIS Act is to regulate the rendering of certain financial advisory and intermediary services to clients. In essence, the FAIS Act deals with:
- Regulating brokers as intermediaries and advisors, and Includes various other professions
- The role of the Ombud is explained and formulated.
There is also the following subordinate legislation to FAIS:
- General Code of conduct for authorised financial services providers (FSP’s).
- Determination of Fit and Proper Requirements.
It is illegal for anyone who has not applied to the Financial Services Board to be licensed as a financial service provider, to give a consumer financial advice or sell a financial product. This law protects the consumer from inappropriate financial advice, and consumers can take action if they are given bad advice.
In terms of this law, anyone or any institution selling a financial product or giving financial advice for a fee or commission must, in all their dealings, meet certain minimum requirements; behave honourably, professionally and with due diligence; provide appropriate advice; and are subject to disciplinary procedures if they do not adhere to the FAIS Act.
A financial service provider (FSP) or an FSP representative must always provide financial services honestly and fairly and with due skill, care and diligence. The service must be in the customers’ interests, and uphold the integrity of the financial services industry.
If a consumer receives inappropriate advice or if a financial service provider (FSP) or FSP representative has not followed the proper procedures, the consumer is entitled to complain to the Ombud for Financial Service Providers. A determination by the Ombud is legally binding.
Policyholder Protection Rules 2004
The Policyholder Protection Rules were issued in terms of Section 55 of the Short-Term Insurance Act and Section 62 of the Long-Term Insurance Act, and replace the rules first issued in 2001.
The Policyholder Protection Rules are separate from those in the code of conduct for financial advisers set out in the Financial Advisory and Intermediary Services (FAIS) Act.
The rules have a strong consumer protection bias, and ensure that policies are entered into, executed and enforced in accordance with sound insurance principles and practice, in the interests of all the parties and the public.
The Short-Term Insurance Policyholder Protection Rules apply to any short-term policy, such as motor vehicle or household policies, or public liability policies (for example, those covering third party payments after motor vehicle accidents), where the policyholder is a natural person. The short-term rules do not apply to commercial policies, such as those which solely cover your business.
General Provisions
In terms of the rules, an insurer must inform the consumer, in writing, of a policy issued to them. The insurer must advise the consumer of any internal complaint resolution systems and procedures, as well as full particulars relating to the short-term and long-term insurance ombudsmen.
No insurer may ask or induce a consumer to waive their rights in terms of the rules, and if they do give any such waiver, it will be regarded as void. No insurer or intermediary may allow a consumer to sign a blank or partially completed form necessary for entering into a policy.
Direct Marketing
A direct marketer is an insurer who uses direct marketing methods, rather than working through an intermediary or broker. Typically, direct marketers use telephone sales consultants and advertising to sell their policies.
The Policyholder Protection Rules relating to direct marketers are similar to those laid out in the FAIS Act that applies to insurance brokers.
Financial Services Ombud Schemes Act 37 of 2004
The Financial Services Ombud Schemes Act (amongst other things):
- Creates a mechanism for statutory recognition of voluntary schemes (long-term insurance ombudsman, short-term insurance ombudsman and banking ombudsman).
- Determines minimum standards required for recognition.
- Provides for an independent controlling body for each scheme.
- Recognises voluntary schemes.
- Provides consumer recourse by way of holistic, standardised mechanisms for client complaints with regard to the financial institutions or services in a procedurally fair, informal, economical, equitable and expeditious manner.
Conclusion
On the Car Insurance Blog we will strive to assist vehicle owners, financial advisors, insurers and industry bodies in creating awareness of car insurance and the importance of car insurance for road safety. This will also include the objectives to create awareness of:
- Legislation in the car insurance industry
- Legal requirements in providing car insurance advice
- Consumer protection to vehicle owners and car insurance policyholders
- Criminal law and car insurance fraud
- Contesting car insurance claims /disputes
- Role of the Ombudsman in achieving fair adjudication of insurance disputes
- Discussion of Decisions made by the Ombud for Short Term Insurance
We will discuss these important aspects in Blog Posts and seek to facilitate interaction with car insurance policyholders.
I’ve submitted an vehicle accident claim to my insurance in July 2010 and after 3 weeks was told that I had judgements on my name of which I wasn’t aware, and based on this they say my claim could be rejected. They are currently investigating whether I signed in acceptance of these judgements. I have never seen or received anything.
If this is so imperative to approving claims why are potential applicants not ITC checked before inception of the policy. I’ve posed this question to them and they say it’s impossible to check each applicant… Instead they diligently receive your premiums month after month. Can a claim be rejected solely on this reason?
Please advise urgently.
Thanks
08.12.10 at 10:44 am
Can an insurance company claim money from me three years after an accident? I was involved in an accident in 2007 which my insurance company at the time dealt with. Three years down the line out of the blue I receive a claim from a third party. I have changed insurance companies in the meantime and am not sure how to deal with this. Could you please give me advice? Thank you!
11.27.10 at 2:41 pm
I am new to South africa and have been given conflicting advice about car insurance in terms of insuring cars of low value. If I was to buy a cheap car ( eg 15,000 rand) for the duration of my stay would i be able to licence it without an ID number and does it need to be insured? I have been told that cheap cars under a certain value do not need to be insured but I am concerned should I be involved in an accident or hurt somebody what would happen then? Thanks
12.05.10 at 5:11 pm
Car Insurance in not yet compulsory in South Africa – but it is always best to ensure that you are protected against all the South African road hazards by being insured.
12.06.10 at 10:53 am
Hi,
Not sure where else to ask this question, but I have a problem and am hoping someone may be able to help in terms of what my rights are. My car tyre burst, damaged the car – car went in for repairs. Was going to collect my car, insurance covering everything etc..then company phoned to say they sent car up the road to replace the tyre AND when the tyre fitment centers driver drove my car back to the workshop he had an accident.
Now, the workshop reckons it has completely devalued the car and is expensive to fix. I want the car to be a write off, as it really is destroyed! Does anyone know what I should push for, and what the best solution here would be? Thanks
12.09.10 at 4:12 pm
Hi,
I was involve in an accident and that was not my fault so my insurance want to write my car off as they say my car damage is above my car value. I requested the second assessor so they saw the car and it cost 20% less of what my insurance quoted. ,The guy agreed that he was wrong I send the details of the guy to my insurance and my insurance even spoke to the guy. So I need my car to be fixed and recover the money from the guy’s insurance.
Please advice , thanks
01.06.11 at 9:37 am
If a person without insurance drives into my car and wrecks it, what recourse do I have? Will they pay damages, got to jail, or get off scott free?
02.15.11 at 10:41 am
I was involved in an accident in June 2010 where I was crashed into and as a result, I crashed into someone else. I filed an accident report the day after it happened and everything was fine with my insurance. This month, I got a call from the guy that I crashed into’s insurance. I was told by them that the guy that crashed into me alleged that I cut infront of him and he therefore did not have enough time to brake. His insurance then called me and asked me again what happened (I now know that I was not supposed to entertain their questions but at the time I did), I told the lady the story (that I changed lanes from right to left preparing to enter the offramp but had checked where the other car was…I also added that he could have been about 2 or 3 seconds behind me). They then conculded that I was at fault because I said 2 or 3 seconds and would therefore not pay the claim from the other insurance. The other insurer (of the guy I crashed into)then called me to tell me that they are going to sue me for the crash. Is that legal? My accident report was pretty clear on what had happened and shouldn’t they have used that report instead of try to get me to make a fault after 8 months it had happened?
02.23.11 at 2:05 pm
Hi there
My dad was driving my car and he got hijacked. I did not submit his name as one of the drivers of my car. My dad does not use my car generally, just that it was an emergency and he was force to. Will the insurance company still cover me for that?
05.08.11 at 9:42 pm
Can a claim be rejected on the basis that you had uncovered months for your car? Whilst this is not outlined in their terms and conditions documents or in any other document of the policy.
05.10.11 at 5:24 pm
Yes They should!! Only if he was a regular driver you would have had to indicate it as such!
05.12.11 at 7:35 pm
Hi, I caused an accident in feb this year, I dont have insurance, but the guy that I hit, was driving his company vehicle, they have insurance, when they phoned me 1 week after the accident, they asked if I can pay the damages of R51 000 so I said I wont be able to afford it, they then asked telephonically if I can pay the exess amount and I said yes but only if they will allow me to pay off, because I dont have all the cash. Yesterday I received a letter of demand from the insurance company’s laywer and they want me to pay R51 000. I need help, what do I do? I dont want it against my name, I dont want a bad name, but I dont have money.
05.20.11 at 1:35 pm
i had a minor acciedent, so claimed, i then get a phone call that they are not accepting the claim as they have done a back ground check and that i told them i had two acciedent not three with previous insurance. Why did they not do a back ground check first, its as though the do this on purpose to try catch you out. DO I HAVE ANY WRIGHTS. what can i do,
05.20.11 at 7:47 pm
Hi, please tell me if a car is still covered within the legal 21 day grace period of an expired liscense disc?
06.08.11 at 2:40 pm
Hi need advice my son was in an accident with my car, he took my car without permission and had no licence so my insurance does not pay any claim, two cars involved as per my son the first car just turn into a street so the car behind this car brake, and the went into the car in front and my son went into the car in front of him, so both cars claim money from him because they told him as the back car he push the car in front of him into the first car, but my argument is were was the distance of both cars I think he is responsible for the car he went into not the other car please help with this question?
06.15.11 at 2:44 pm
I was in a car accident on 14/05/2011. I contacted Firstroad for towing assistance and it was authorized that Lansdowne Towing (Lansdowne Towing a division of AMM Towing) assist with towing the vehicle to SMD Stikland. The same morning of the 14/05/2011 I went to Lansdowne towing premises and my vehicle was still at their premises, they informed me that I should make a payment for the towing. On the 16/05/2011, Telesure requested that Lansdowne towing deliver the vehicle to SMD Stikland. The vehicle was then delivered to SMD Stikland. The problem is that I received a tow reference at the scene of the accident and yet I was requested to pay for towing and Telesure (Payment Dept) also paid for the same services. Staff of Telesure and First Management phoned Johan re: this matter already and he refuse to refund the money he owes me. Please advise urgently.
07.22.11 at 10:30 am
How do we assist the Insured’s if and when thier claims are rejected we are in the business of assiting them
08.12.11 at 4:00 pm
WE WERE INVOLVED IN A ACCIDENT OUR CAR IS NOT INSURED BUT THE PERSON WHO MADE A U-TURN IN FRONT OF US DOES, HE SAID WE COULD CLAIM AGAINST HIM AND HE DID ADMIT ON THE ACCIDENT SCENE THAT IT WAS HIS FAULT AND HE DID NOT SEE US. WE SUBMITTED THE CLAIM AND NOW IT WAS DECLINED ( BELOW IS THE REPORT FROM THEM ) WE WOULDN’T BE ABLE TO SPEED AS WE DID STOP AT A RED TRAFFIC LIGHT AND THE ACCIDENT TOOK PLACE APPROX 40 METERS FURTHER – WE ONLY DRIVE A TOYOTA 13HUNDRED AND IT IS NOT A FAST CAR…. WHAT WOULD BE THE NEXT STEP – WE NEED OUR VEHICLE TO BE REPAIRED – WE DID NOT MAKE A U-TURN IN FRONT OF OURSELVES
- Our client advises that he had indicated his intention to turn right and was stationery waiting for oncoming traffic to clear when the collision occurred
Should your driver have travelled at a reasonable speed he would have fore saw our client’s stationery vehicle and would have been able to brake and avoid the collision altogether.
A reasonable driver, keeping a proper lookout would have seen the stationery vehicle and attempted to avoid the collision, however based on the damages it is clear that your driver proceeded in the same direction and speed, resulting in the collision.
08.16.11 at 3:37 pm
Good day,
I drove over a stone/brick in traffic yesterday (23-8-2011). I had to have the tyre replaced. I had it done at Tiger Wheel and Tyre. Very helpfull and friendly people. The person that helped me told me that I would have to replace the 4 remaining tyres on my car at the end of this yeas seeing that the tyres are 5 years old. According to him if I was involved in an accident that my insurance would pay if the tyres are more than 5 years old. There are still 5mm tread on the tyres left. Is this true about the age of the tyres.?The date on the tyres are 2006 and my car is a 2008 model.
Regards,
Pierre.
08.24.11 at 11:02 am
I was involved in an accident a month ago. I drove into the back of a car in traffic. I am not insured but the other car was. The driver said that I would only be liable to pay the excess of his car (which was R4500) and that was our agreement. Then his insurance phoned me and said that I am liable for R11 450 for the entire claim. Is there anything I can do? What does the law say about this?
09.19.11 at 3:11 pm
Hi there. Who can i phone to see if a company is registed to provide insurance for cars?
09.22.11 at 2:49 pm
I was on holiday in September 2011 and my vehicle was stolen. The insurance company has checked out that all my security requirement as stipulated in my policy has been met, kniow they are questioning who when why and what on how I managed to get home. I am know being harrased and questioned for receipts and proof that I was actually there on holiday. Who can advise or help me on this as it has been a month now and I am at my wits end…..
10.26.11 at 11:34 am
@Elia – If you have doubts, then it is most probably not a reputable company and I would not recommend that you even consider taking out insurance with them.
@Haley – I wish I was allowed to hazard a guess about which insurance company you’re referring to here, but I’m sure I’m probably right. A reputable company (who uses brokers) would not ask such silly questions. If you reported the loss to the SAPS and Tracking Company (if relevant), then finalisation of the investigation should be a relatively simple task. I suppose it’s understandable for them to ask how you got home after the loss of the vehicle, but asking for receipts to prove that you were on holiday is RIDICULOUS! Contact the Ombudsman if your claim is still outstanding! Good luck!
10.27.11 at 9:06 pm
Kindly seeking assistace, my son was looking at car, the sales man approached him with regards to purchasing a vehicle, by then he had a learner’s license only. The agents promised him that he would assist him in getting the car, of which he did. My son thought that he would get a license and would drive the car freely. The car was then finance through a major bank of South Africa and was insured by budget insurance. After a couple of weekis while learning to drive, he was involved in a horrific accident which left him traumatised even now. The car was on his name and same as the insurace. My question is ” Is it possible for the Bank/Insurance company finance or cover for a vehicle on a driver who does not have a valid SA License? ” Kindly assists as he cannot afford now to pay for the car, I would like to take the case further. Thanking you.
10.29.11 at 5:13 pm
After my daughter’s car was written off by a taxi, we were told by Miway, the insurer, that we would receive market value in compensation which infers the value of the car on the open market, which also infers that it would be replaced with like. We have discovered that market value is calculated according to a book which the insurance industry recognises but was not told to us at the time of taking out the insurance, which value no way near replaces the lost vehicle. Do we have to accept a value decided by the insurance company in whose interest it is to reimburse us as little as legally possible. Who in their right mind would insure a vehicle with a company, knowing that on total loss they would only be refunded sufficient for a deposit on a replacement?
11.05.11 at 7:01 pm
I was involved in an accident on the 24/09/2011 there were five cars and a truck. The truck driver lossed control and my car was the thrid vehicle to be hit. I am a student and do not have insurance as it is out of my financial range. I have submited a third party claim aganist the Truck company insurance. i am now with out a vehicle. Is there any law as to how long it should take for the claim to be paid out.
I wanted to claim for the towing storage and hire vehicle but the insurance company is refusing to fit these bills. Can you tell me what I am entitled two and how long before this entitlement is allowed to take before payment is made?
11.14.11 at 2:03 pm
i was involed in an accident in February 2011. My car was written off and the insurance (FIRST FOR WOMAN) gave me a new vehicle. The problem is, the car i insured with the insurance company had (FACTORY FITTED CENTRAL LOCKING). The car they replaced it with has no factory fitted cetral locking. The alarm system they installed if faulty and the central locking they intalled in my car after i received it is faulty, only 3 door open when i press the remote and the central locking is not linked to the boot of my car which means i now have to open my boot manually and lock it mannually as the central locking they put in my car is not linked to my boot. they told me if i want to link my boot the the central locking that they had installed i must pay for it myself and if it gives me problems i must not complain to them i must complain to the guys they paid to install this fauly central locking. as it stands, when my alarm is activated, you can enter my car thouhg my boot and the alarm does not even go off. They refuse to give me a car with factory fitted central locking. They claim they never knew my car had central locking and that now that they have given me this car with many alarm problems , im stuck with it and i must fix those problems at my expense? the manager also told me that if i’m not happy with the downgrade of a car they gave me i must take it furter and contact my lawyers knowing very well that i do not make a lot of money and would never be able to afford a good lawyer. pls advice. i’m really frustrated.
01.16.12 at 5:09 pm
I have taken out car insurance 3 weeks ago, but decided to cancel it as I found a better deal somewhere else. The insurance company requires a 30-day notice period. Therefore I was advised that I will have to pay a pro-rata premium for cover until the notice period expired. Is the required 30-day notice of cancellation legal?
01.26.12 at 12:58 pm