SA’s planned road demerit system and the effect on insurance

The planned road demerit system may have a grave impact on the insurance industry.

road demerit system

The road demerit system planned for SA may seem a workable solution to the high death toll on our roads but the insurance industry will suffer the unintentional consequences.

Vera Nagtegaal, executive head of, says the proposed demerit system for SA road users could significantly reduce road fatalities by imposing punitive action on motorists who break the rules but when the system comes into effect the ramifications for consumers and the industry will be far-reaching.

The SA insurance industry traditionally has a low penetration among vehicle owners in the country. A few years ago, the Automotive Association (AA) estimated that 65% of all vehicles on our roads are uninsured. “The suspension of a motorist’s license is likely to increase their insurance premiums or excess, influenced by greater perceived risk on the insurer’s part,” says Nagtegaal.

This poses all kinds of difficult questions: How will an insured motorist afford higher premiums or excess when their license gets suspended? Will the motorist with the suspended license forfeit their insurance cover and thereby be precluded from obtaining vehicle insurance from any other service provider? How will this affect the insurance industry at large? A reduction in the industry’s size will invariably lead to job losses? how will these individuals be absorbed into the labour market? she asks. 

In consultation with industry

The top priority is reducing South Africa’s high road fatalities and accidents, stresses Nagtegaal, saying there have been several deficiencies in road-awareness campaigns launched over the years. “These campaigns have simply targeted motorists instead of incorporating education programmes also aimed at teaching pedestrians about road safety and taking responsibility for their individual conduct when making use of road facilities.”

Pedestrians accounted for the largest proportion of total road fatalities in 2016 at 38%, according to the Road Traffic Management Corporation (RTMC). Road casualties among passengers and drivers came in at 33% and 26%, respectively.

Nagtegaal says it is evident that a more holistic educational approach is needed to eradicate reckless driving by motorists, and encourage pedestrians to exercise greater caution when crossing our roads. Beyond consumer education, the demerit system warrants better engagement with the entire industry.

“The process must identify reasonable implementation phases that will not inhibit the operation of the insurance industry nor cause irreparable damage to it. On the other hand, the loss of lives on our roads has become a national crisis that we can no longer ignore.”