Motor vehicle insurance: It’s not what it used to be
John Smith* is a 66-year-old retiree who recently sold his house in Constantia, Cape Town, along with most of his possessions, and bought a top-of-the-range, custom-fitted motorhome. He and his wife intend to travel through Southern Africa for the next 10 years. As a person of no fixed address, he was uncertain about the kind of insurance he would require for his vehicle (his new home!) – would he be covered under a standard motor policy, or would he need specialist insurance?
Motor vehicle insurance isn’t as clear cut as it used to be. Increasingly, insurers must consider motorists and their vehicles that are out of the ordinary, as international motoring and leisure trends start to take root in South Africa. And as can be seen from John’s example, it’s not just the 4x4 enthusiasts that need cover of a different kind.
“We have certainly had some unusual requests for vehicle cover over the past few years,” says Marius Neethling, personal lines underwriting manager at Santam. He says most general insurers now offer specialist 4x4 vehicle insurance for off-road adventurers, which – besides standard vehicle insurance – also provides cover for events such as emergency repairs, winching equipment, repatriation costs, extinguishing costs and wreckage removal. But insurers must also consider cover for:
- Motorhomes: Known as recreational vehicles (RVs) in the USA, motorhomes are becoming a trend in South Africa. “We can’t insure these as we do caravans, as they often contain everything an individual will need for the foreseeable future, including the kitchen sink,” says Neethling. They can cost up to R1 million, depending on the level of customisation. Some owners also attach an A-frame trailer to their vehicle, to transport a small car along with their new ‘home’.
- Hybrid and electric vehicles. While the first electric vehicles went on sale in South Africa in 2013 hybrid vehicles have been available locally since 2006, and sales of these electric and hybrid vehicles have increased rapidly. “We are continuously reviewing the risk involved in driving these cars, and whether we need to insure them differently to other vehicles.” Neethling says Santam’s highest claim for a hybrid vehicle was for accident damage valued at R125 000. “We have had no vehicle write-offs so far, possibly because the distance these cars can travel is limited – some electric cars can be driven only for around 160km before the batteries need to be recharged.”
- Ride-on mowers, golf carts, quad bikes and shopping riders. These vehicles do not have to be registered as motor vehicles. “Shopping riders, which are essentially electric wheelchairs, have really taken off here and one sees them in most large shopping centres,” says Neethling. Santam covers accidents and theft of such vehicles, as well as a minimum level of liability.
- Modified or built-up vehicles. Neethling says Santam has had a few requests over the past few years to insure vehicles which have been converted from diesel or petrol models to electric or hybrid cars. Most insurers regard such vehicles as ‘built up’, resulting in higher monthly premiums than for the ‘original’ vehicle.
- Rebuilt (‘code 3’) vehicles. These are vehicles written off in an accident and declared unfit for use as motor vehicles, but rebuilt and registered as ‘code 3’ vehicles (code 1 being a new vehicle and code 2 a second-hand car). “There is a trend for panel-beaters to buy these vehicles, and rebuild and resell them,” says Neethling. Santam calculates the market value of such vehicles at around 30% less than auto dealers, and the premium is usually loaded by around 20%.
So how do general insurers cover vehicles they regard as falling into a specialist category? Neethling says cover usually consists of ‘own damage’ (accident, theft or hijacking) and third-party liability. “It’s all about the risk. If we receive a request we regard as unusual, Santam’s risk management department will consider the technical and risk implications, and establish whether or not we have the risk appetite to insure the vehicle. If we do, we will then decide on the rating structure and the underwriting requirements, for example, the level of excess applicable.”
Neethling advises brokers receiving out-of-the-ordinary requests from clients to the insurer’s contact centre. “The field of specialised vehicle insurance is so wide that brokers can’t be expected to be experts in any particular direction. If you are unsure, you can contact any of the agents at Santam’s contact centre, and the query will be escalated to our technical underwriters for consideration,” he concludes.
*Name has been changed.