23 February 2005


I have been given a copy of the above bill and I have been asked to comment on the financial impact of the new provisions with special reference to the case of negligent drivers. The main financial impact of the amendments is to limit the amount, which may be claimed in respect of loss of income and loss of support to R160 000 per annual with no guaranteed inflationary increases.

Hence, if a driver is the sole cause of the accident which causes the total and permanent disability to another person earning more than R160 000 per annum, he will be liable under the common law for the difference between the injured's party's income and R160 000 per annual from the date of the accident to the age of 65 of the injured party. By way of example if the injured party was earning the monthly amount set out below the amount for which the negligent driver would be liable is approximately as follows:-

Value of Income in excess of R160 000 per annum

Age of Injured Party

R20 000 pm

R40 000 pm

R60 000 pm

R80 000pm


3 089 000

6 765 000

10 426 000

14 087 000


2 499 000

5 652 000

8 793 000

11 934 000


1 790 000

4 267 000

6 734 000

9 200 000


1 022 000

2 670 000

4 511 000

5 953 000


297 000

937 000

1 574 000

2 211 000

In addition, in view of the fact that general damages will now only be paid in exceptional circumstances, in most cases the negligent driver will be liable for the injured party's general damages.

Hence, in the absence of insurance, a homeowner, for example, using his motor vehicle runs the risk of losing his home and other assets in the event of the amendments coming into force.

The same would also apply to the owner of minibus taxis, haulage businesses and bus companies and in fact any person or business with free assets.

Hence the prudent individual or company should try to insure himself against the above risk and the only way currently available is to purchase a motor policy. However the maximum liability under these policies is normally R2 500 000 subject to reduction depending on the age of the insured driver and the length of time that he has been driving. Hence the current limit will only provide full cover to a limited number of the examples set out above.

Other drawbacks to a motor policy are that no cover is given in the event of the negligent driver being over the legal alcohol limit and people with bad past claims would not be granted cover.

I have talked to various people in the short term insurance industry and I get the impression that they are not keen on this type of business and if the amendments are passed they may well exclude in total their exposure to this risk. Even if they keep their existing policies unchanged, as extra claims filter through, there will be an inevitable increase in premiums.

It is probably the case that the majority of minibus taxi owners do not have any insurance but if they now decide to insure their vehicles to protect themselves against legal action these costs will be passed on to the consumer with a resultant increase in fares.

It seems very unfair to me that amendments to social legislation could lead to a position where citizens run the risk of losing all their assets since full alternative cover is not available at the present time.

Yours faithfully





11 April 2005

I have been informed that there are proposals to limit the amount payable in respect of future loss of income with respect to persons injured in motor vehicle accidents to a maximum of R160 000 per annum terminating at age 65. Further, that for all practical purposes, no General Damages will be payable to the overwhelming majority of accident claimants. Accordingly motorists and their families will be advised to seek to protect themselves and their families with respect to the balance of their loss of income by purchasing private insurance. I have had regard to possible costs of such insurance as dealt with in the Satchwell Report. Two examples are dealt with hereunder;

Case No1

Married male aged 35, wife aged 32, children aged 5 and 3, earnings of R600 000 per annum to age 65,

Case No 2

Married male aged 35, wife aged 32, children aged 5 and 3, earnings R 500 000 per annum,

Case No 1

Married male age 35, Wife age 32, Children aged .5 and 3.

Earnings R 600,000 per annum until age 65, Income R 420 000 per annum after age 65.

Capital required if 100% disabled, before contingencies

R 7,640.080

The value of the benefits provided by the Road Accident Fund

R 2.349,204

Balance of cover required:

R 5,290,000.

The Road Accident Fund benefits are based on a maximum. salary of R 160,000 per annum before lax and are assumed to cease at age 65. The premium has been calculated to cover not only the driver but occupants of the car and also the occupants of a third party's car. The premium also takes into account that 20% of the gross premium charged by the insurance company will go towards administration costs, commission etc The cost per car is R 3,416 per month.The above covers the cost of injuries.

It will also be necessary to cover the cost of the breadwinner dying in a motor accident. The value of the loss of support of the dependants before contingencies and remarriage deductions is R 4,494,012. The value of the Road Accident Fund benefits is R 2,304,480, Therefore, further cover of R 2,200,000 will be required. The monthly cost of this cover is R 356.

Therefore, the total cost per car in this particular case is R 3,772 per month. If the family has two cars the total premium will be iii the region of R 7.500.

Case No 2

Similarly, if the person described above earned R 500,000 per annum the total cost of insurance would be R 2829 per month per car.

The above Figures represent the upper limit of what could be charged. I imagine that the insurance companies do not have a more accurate assessment of the cost of doing this. Sort of business. It would also depend on how many people effect the cover. In 2001. The total amount of claims exceeding R1 million came to R182 million. Assuming, that 20,000 people take out this insurance the cost would +R1 000 per month. These costs are only approximate.

Further the cost of covering the 3rd party is also borne by the comprehensive cover and this will have to be taken into account. At this stage it is very much guesswork. But if the insurance companies undertake this business they will obviously be very cautious.