A report released by the Road Traffic Management Corporation in September estimates the total cost of road traffic crashes in South Africa in 2015 at close to R143 billion. This equates to 3.4% of GDP.
The authors of the report used a formula which took into account the cost of human casualty, vehicle repair, and other incident costs (e.g. legal costs). The authors estimate the average vehicle repair cost alone at close to R27,000.
Given this high cost of processing an accident, it is little wonder people with no accident claims are offered cheaper car insurance . Insurance company rewards for driving less and for driving safely are also becoming increasingly common in the industry and as technology advances in its tracking and sensing capabilities and decreases in cost, insurance companies are likely to use these tools to offer far more individually tailored insurance products.
Road accident fatalities in South Africa are at a very high level with 7.5 times as many fatalities recorded in 2015 compared to fatalities in the United Kingdom, for example. Africa overall reports the highest number of road accident fatalities on average (26.6 per 100,000 inhabitants) and South Africa is only slightly below this average at 25 fatalities per 100,000 inhabitants per year. This is the highest average of all the BRICS countries.
Car insurance is also not cheap in South Africa. In fact, if you consider average middle class income, we pay amongst the highest proportion of our salaries for car insurance in the world! One study showed that Americans paid the highest proportion of their salary on car insurance at 3% of annual salary, compared to Austrians, Germans, the British and Australians. If one takes the average annual middle class salary as R150,000 per annum and an average monthly car insurance cost (single car) of R500 per month, one ends up with 4%.
It is thus clear that South African insurance companies and consequently consumers are bearing a heavy cost burden from the number of road crashes and fatalities in the country. Insurance companies are likely to continue to enhance their algorithms in calculating insurance premiums and South African consumers will do well to shop around for the most competitive and advantageous insurance premiums .