What you need to know about the looming AARTO Act

Personal Lines

What you need to know about the looming AARTO Act

Published: 24 March 2021

The long-awaited driver demerit system is likely to come into effect this year. The Administration Adjudication of Road Traffic Offences Act (AARTO) has been in the works for a while – since a trial in 2008, in fact – but it’s now firmly back on the agenda, with commencement planned for July. Seen as a silver bullet to curb the country’s road fatality rate – South Africa ranks 13th out of 195 countries for its number of road deaths per capita – AARTO has big implications for drivers and their insurance.

Craig McLaurin, Senior Motor Underwriter: Commercial Underwriting Services at Santam, says AARTO is a positive act that should hopefully address the country’s status as one of the world’s most dangerous places to drive, “It will take a while to implement and enforce, but once it’s fully operational and South Africans understand its implications, it should make a dramatic difference.

“Currently, 90% of road accidents are preceded by a road accident offence. The threat of losing one’s licence is likely to change reckless behaviour for the long-term. This should have a collective knock-on effect on insurance premiums. Fewer accidents and fatalities mean the price should go down for everybody.”

AARTO in a nutshell

AARTO will penalise drivers and fleet operators who are guilty of traffic offences or infringements by imposing demerit points that could lead to the suspension or cancellation of licences, professional driving permits or operator cards. It will also encourage the payment of fines and reduce the burden on South African courts, by removing the initial option to elect to appear in court.

The number of points incurred will be dependent on the nature of the traffic offence or charge. Currently, there are over 2500 separate charges. All drivers will start with zero points. Once the limit of points is exceeded, a driving licence is suspended for three months. Driving a vehicle during this ‘prohibition period’ is a criminal offense, subject to a fine or jail time.

If a licence is suspended for the third time, it will be cancelled, and a driver must start from scratch with a learner’s licence, etc.

Demerit points do decrease by one point every three months, so drivers can work their way back down to zero.

What you need to know from your insurance perspective:

McLaurin and Liz de Villiers, Manager: Commercial Motor Underwriting at Santam, weigh in:

  1. Ensure the points go to the right person: You need to notify the relevant authorities who was driving the vehicle when the law was broken. This is particularly important for companies, where cars could be registered in one person’s name, with employees authorised to drive it.
  1. Tell your insurer if your licence is suspended/ cancelled:

If the licensing laws suspend or cancel the driving licence of the Insured or an authorised driver, as may happen in terms of the AARTO Amendment Act, the Insured would be obliged to notify the Company that a driving licence has been suspended or cancelled.

Subject always to the circumstances of the defined event, should a driver operate an insured vehicle with a driving licence that is suspended or cancelled, the policy may exclude all cover for the event.

AARTO, Insurance and Underwriting

While we do not explicitly point to AARTO or any similar legislation, in our policy wording we say that we will exclude all cover incurred by an insured vehicle if it is being driven by:

  • the Insured who does not comply with the licensing laws of the country where the defined event happened;
  • any other person who drives with the general consent of the Insured and does not comply with the licensing laws of the country where the defined event happened.

Our wording includes a ‘Compulsory Condition’ that obliges the Insured to advise the Company if any driving licence of the Insured or authorised driver of the Insured is suspended or cancelled.

If the licensing laws suspend or cancel the driving licence of the Insured or an authorised driver, as may happen in terms of the AARTO Amendment Act, the Insured would be obliged to notify the Company that a driving licence has been suspended or cancelled.

Subject always to the circumstances of the defined event, should a driver operate an insured vehicle with a driving licence that is suspended or cancelled, the policy may exclude all cover for the event.

Demerit points in Underwriting

There is a school of thought that says demerit points should be used in underwriting. The concept is that is an indication of the ‘riskiness’ of a driver. Anything that poses a higher risk can be used as a rating factor in determining the acceptance of the risk and/or pricing.

While this is possible in the case of an individual in Personal Insurance, it will be a challenge in Commercial Insurance where the business makes use of multiple drivers. At any given point in time, we may never know who the authorised or regular driver of an insured vehicle is.

There are also many scheduled offences that hold demerit points for events that do not increase the risk or diminish our risk appetite.

For example, there is one (1) demerit point for the inconsiderate driver who parks in a bay reserved for disabled people.

Further, we do not always know the circumstances or reasons of the demerit points. In terms of the regulations, the driver can make representation for a matter to be withdrawn. If number plates are falsified, it is possible that a vehicle could inadvertently pick up demerit points for the speed violation of that fraudulent driver.

Concluding comments

Unfortunately this is one of those heavier topics, which we need to be mindful of. While this is not yet cast in concrete, we will be watching to see what the final legislation looks like.

An important point to repeat is that the person or driver responsible for the traffic violation should get the applicable demerit points. If not so done, the wrong person could find their driving licence suspended, which could hurt their lifestyle, affect their insurance, and perhaps even their reputation.

This is new ‘landscape’ in South African legislation. We do not want to rush into this forcefully or incorrectly use this information. This will be worked out in time.

What we do know is that the underlying sentiment of the legislation should over time improve driver behaviour – and hopefully this will lead to safer roads for us all.