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Regulatory changes: South Africa's New Demerit System will Affect Your Insurance

Nov 22, 2019
Regulatory changes: South Africa's New Demerit System will Affect Your Insurance

Port Elizabeth - The Administrative Adjudication of Road Traffic Offences (Aarto) Bill has been signed into law in August. It aims at changing driving behaviour through the implementation of a demerit system, which will be implemented in Johannesburg and Tshwane.

The Aarto Act sets up a demerit system for motorists, who accumulate points for traffic offences, which may eventually result in the loss of their driving license.

Drivers start off with zero points. Working on an accumulative basis, the points cannot reach more than 12. Each specific traffic infringements are assigned a different number of points, together with a fine.

Depending on the severity of the offence, one to six points are allocated for offences. If a driver accumulates 12 or more points, their licence will be suspended for a period of three months. Three suspensions will result in its permanent cancellation.

Some of the traffic offences that could increase demerit points are driving without a licence (4 demerit points); driving under the influence of an intoxicating substance (6 demerit points); using and holding a smartphone while driving (1 demerit point); speeding (anywhere from 2 to 6 points depending on the speed limit); skipping a stop sign (1 demerit point).

Even though the demerit system’s main goal is to enhance road safety, it has some indirect impacts on the insurance industry.

Drivers with poor record on this system could face higher premiums – but that would depend on each insurance company. In contrast, the demerit system could be beneficial for the majority of motorists who are generally law abiding. While bad drivers are penalised, good drivers could benefit from lower premiums.

AARTO Bill South Africa

In the worst-case scenario, drivers can lose their licenses due to driving offences –even minor ones– which could basically mean that their existing car insurance will not respond in the event of an accident, as cover does not exist if a driver does not have a valid driver’s license. In other words, if you drive with a suspended licence and you have an accident, your policy will not pay out.

When asked what car owners should do if their license gets suspended, car insurance companies answered that motorists should notify their insurance company right away to avoid any further complications.

As the system also prevents recurrent offenders from renewing their licence if they do not pay their traffic fine, it is feared that this will increase uninsured vehicles on the road.

The new demerit system seeks to have a positive impact on road safety in the country, but it may have some indirect impacts on driver’s insurance as well. Whereas for the law abiding premiums could become lower, for offenders insurance companies may set higher premiums.

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