Auto and On-The-Road Insurance: Necessity or Luxury

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There are more people on the road that don’t drive with car insurance than people with insurance. Drivers on the road without car insurance are a big issue in South Africa. More and more vehicle owners are choosing to cancel their insurance to try and save money. When financial times are tight it might seem like a non-essential expense, however the consequences can be dreadful.

One reason for very low levels of insurance is that vehicle insurance is not compulsory in South Africa, although it is in many other countries. It only becomes compulsory if you’ve bought the vehicle by using a financial institution to assist in buying the vehicle. I’ve chosen this topic to research due to a press release by the Automobile Association of South Africa that there are currently 11.4 million registered vehicles driving on our roads, of which between 65% and 70% are uninsured. My objective will be to find out what the reasons are for people driving without car insurance and the impact it has financially. I will also have a look at the advantages and disadvantages of driving with insurance versus without. Most South African’s are well-educated on the consequences of not insuring their vehicles however its surprising how many drivers assume they won’t become a victim of theft or be involved in an accident. Paying for car repairs can be a massive expense for most with huge financial implications to them and their family. If someone else is at fault during an accident and they don’t have insurance, you better hope they pay out without the need for legal action.

Hypothesis Statement / Question

Vehicle insurance should be a necessity to protect motorist from becoming indebted in the event of an accident, damage or theft. It’s hypothesized in South Africa that vehicle insurance is a luxury and not a necessity. The question is do we think every car owner should by law have car insurance in South Africa or not? Is car insurance unaffordable and does advantages of not having car insurance outweigh the disadvantages?

Research Methodology

Primary Research:

I used the internet sources widely as well as a questionnaire to conduct my primary research. The aim of my research is to present an answer to the question of why people are driving without insurance. I set up a questionnaire, made copies and asked people that I know to complete it for me. The questionnaires were anonymous. I asked 30 Adults between the ages of 19 and 48, male and female. 18 respondents were female, and 12 respondents were male.

Secondary Research:

Source 1:

This source looks at the behavior of motorists in general whose vehicles are registered, how many of these are insured and how many are uninsured. The source also reveal that this does not included vehicles that’s unregistered or classified as unroadworthy. The source is also quite recent. The limitation would be that it’s based only on registered vehicles and does not include unregistered or unroadworthy vehicles.

Source 2:

This was a good source as the You Tube clip tested the reasons why people don’t have car insurance and looked at a lot of possible variables that could explain the reason why they don’t have car insurance. The limitation on this source is the fact that it was done in the United States of America, so it could be different for South Africans.

Source 3:

This was a good source as the You Tube clip tested the reason why you need car insurance and the possible variables that could change people’s mind on insurance. The limitation on this source is that it was done in India and could be different for South Africans.

Research Findings

From my primary research questionnaires majority of the respondents indicated that they will more likely have car insurance than not. It was also clear that the advantages of having insurance outweigh the advantage of not having insurance. It was also clear that by not having insurance it will put a huge financial burden on you.

The findings in source 1 show that between 65% and 70% of the 11,4 million cars in the country are not insured and that there are nearly eight million uninsured registered vehicles in South Africa. The problem also goes further as it is estimated that up to 800 000 vehicles in South Africa are either unregistered or unroadworthy which means they are also not insured. The source also shown that the cost of non-insurance is higher as it places you at a greater financial risk. Source 2 determined that the reasons why people don’t have car insurance is because of the lack of understanding the risks and weighing the advantages up against the disadvantages. Also, the lack of budgeting correctly and looking at cheaper affordable insurance, as they say rather have something then nothing. Source 3 determined the reason why you need insurance and looking at the benefits thereof. I can conclude that both source 2 and 3 supports my hypothesis because the change on how people see insurance and the benefits of it can protect you in the long run and not put you in a bad financial situation. My research findings support my hypothesis that car insurance should become a necessity and not just be a luxury.

Relationship Between Theory And Practice

Marketing theory tell us that there are a variety of things that could influence the way in which motorists behave when thinking of insuring their vehicles, i.e their car is not their pride and joy. To some, bumps, dents and scratches are a huge deal but to others they’re only concerned about the main function of their car to get them from A to B. The problem with this is that many of these drivers don’t take the third party into account. Some other influences are also obvious like they don’t drive often, they can’t afford insurance or just don’t realize the consequences of not having insurance. There are also a few psychological factors that can influence motorists’ decisions to have car insurance or not i.e they think they are such good drivers and don’t need insurance or as stated before their car is not their pride and joy.

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I believe my research have proven that in reality there are hidden factors why people don’t have car insurance like many numbers of motorists underestimate the consequences of having no insurance and believe something bad won’t happen to them or their vehicle. If an uninsured motorist crash into someone else’s car, causing damage to that car, you will be liable for the cost of the damage you caused which can amount to a huge financial loss. People don’t realize that even if the driver you crashed into is insured, his insurance company will name you as the guilty party for payment. If you are uninsured they will sue you in your personal capacity.

The hijackings, vehicle theft and accident statistics in South Africa are more than enough motivation to have car insurance. If a person is driving without insurance they will be 100% responsible for replacing their vehicles and this can cause an enormous financial setback and leave your family without transport for a long period of time or even worse if you are still paying off the car then your monthly repayments will continue, while you struggle to pay extra transport fees and I believe in theory and practice this is not worth the risk. In theory and in practice motorists assume that they can’t afford car insurance however there are several different options available to you which has been developed to suite a wide range of income bracket consumers. We can also see from the research that every motorist is different, and that theory alone could never summarize all the variables.

Analysis of Current Trends, Opportunities or Issues That Have an Impact on the Industry

My research finding showed as the insurance industry continues to change they have to face new challenges from motorists who cancels their insurance rather then to keep it due to financial strain or the fact that they don’t understand the product. The insurance industry has a huge role to play in the fact that motorists can’t afford car insurance and on top of this problem they also need to take in consideration the key trends that are likely to shape the South African insurance industry, as well as the reasons why motorists don’t have insurance. The most common trends that are looked at is:

  • Regulation such as the policyholder’s protection rules that ensures that motorists get access to adequate affordable products. The protection of personal information act that regulates how customers data is managed and then also treating customers fairly.
  • Climate change, the increase and severity of extreme weather conditions like we have seen in South Africa with the drought problem that we have been facing.
  • Strict underwriting measures – Due to increasing losses and insurance costs, insurance companies have more strict underwriting, and this causes motorist not to have insurance
  • Product modernization – Insurance companies need to work towards a more affordable product for motorist especially in the lower income market as the needs of motorists are ever changing.

There are opportunities for insurance companies to turn the statistics around on how many uninsured motorists there are on South African roads like:

  • Looking at innovative solutions to keep people insured and not cancel their insurance because of financial constraints but rather see where they can assist
  • Design more affordable products for all income classes
  • Educate motorists through advertisement on the importance of having insurance. Rather have some insurance then nothing at all as this will put motorists’ minds at ease. Explaining the advantages of having insurance rather than the disadvantage of not having insurance. Other issues that also plays a role in uninsured vehicles in South Africa are
  • Insurance premiums are just not affordable to the consumer
  • Motorist that don’t drive that often think they don’t need to be insured
  • Motorist don’t realize the consequences of not having insurance
  • Their car is not their pride and joy and don’t care about bumps and scratches
  • Motorist thinks that it will never happen to them i.e. hijacking or theft
  • They are unaware of the high financial impact a loss will have on them

Economic, Ethical, Social and Environmental Implications and Consequences of Research Findings

From an economic perspective my findings show that with the downgrading of South Africa’s credit rating and the ever-increasing inflation that this increases the living cost of every South African and makes car insurance a luxury and not a necessity. Its been estimated that 65% – 70% of the vehicles on our roads are not insured and consumers are not expected to buy new vehicles because of economic difficulties, this is a bad reflection on our counties economic status and will also affect the countries growth going forward. It is likely that motorists will re-think taking out insurance and rather spend their disposable income on other items they deem needed. Alternatively, motorists will look at more affordable insurance which will have an impact on larger insurance companies if they don’t re-look at their products and make it more affordable. This is so important for insurance companies to look at their pricing to ensure that it’s affordable as this will help the economic growth of South Africa and their people.

From an ethical perspective my findings show that motorist in South Africa should have an ethical obligation to one another and understand the difference between good and bad. Yes, you might decide not to have car insurance for what ever reason but should then also think of the burden you will put onto other people because you decided not to have insurance for your own good or bad. Ethical behavior tends to be good for business and involves demonstrating respect for moral principles that include honesty, fairness, equality, dignity and individual rights.

The social implications of not having insurance is that thousands of people a year are injured or killed by uninsured drivers and compensation for these tragedies is paid for through the insurance premiums of a law-abiding motorists which is not fair on those people that have insurance. Motorists who has ethics and morals will have insurance and this will have no social impact on the country as whole. Looking at taxi drivers in South Africa who mostly are driving without insurance, should have a social and ethical responsibility to their passengers. Should their drivers be in an accident with fatalities they should be accountable for the social and financial implications of those families. Most insurance companies do cover loss of life in an accident when it comes to public transport and they should not run the risk of loosing everything they have because they got sued by the family of a passenger, this statement about taxi drivers in South Africa is also the same for any other motorists.

The consequences of driving an uninsured vehicle is high since you will be liable for your own damage as well as the other driver, even if the other driver is insured. This will have a huge financial implication on the uninsured driver and his family and will have an impact on their standard of living going forward as it can set a family back for many years. I feel that social media can be very effective in changing the minds of motorists.

Own Recommendations on Findings

After completing this research, it is my opinion that the risk of driving an uninsured vehicle could have tremendous financial impact on all South African’s on the road. With a growing number of people not insuring their vehicles, I think responsible vehicle owners have no choice but to insure their assets and if costs are an issue they should research different options available to at least give themselves a little cover instead of none. I believe that every car owner should by law have car insurance as it’s a necessity. Having a good insurance policy puts your mind at ease should you be in an accident or have your car stolen, you are covered. With South Africa’s high accident and car theft rate and hijackings we cannot afford to drive uninsured vehicles as this has very high implications for all road users, whether or not they are insured. I suggest we need to educate the public on the advantages of having car insurance and the positive impact it can have on your financial situation should they have any loss. People don’t have insurance due to the lack of understanding the consequences of not having any.

I believe that it needs to be law that you can’t drive your vehicle on our roads with at least the minimum insurance of third party, fire and theft insurance or even limited cover as this will reduce the risks for all motorists and should be compulsory. Third party cover however will not cover you for damage to, or the loss of, your own vehicle in the event of an accident or loss by theft, or fire but will cover the cost of the other driver. Limited cover on the other hand covers your vehicle for damage caused by fire, theft and hijacking as well as injury to other people or damage to their vehicles. South African Motorists should stop making excuses of affordability and rather make lifestyle changes and remove non-essential expenses like DSTV subscription before they drive an uninsured vehicle or before they cancel their insurance consider amending their cover until your finances have recovered.


Reflecting back on this mini research task the positives I can take from this is that I have learned so much about car insurance and the reasons why you can’t go without. During my research I have also come across other information that wasn’t 100% aimed on my subject but reading all research looking for the information relative to my subject I have learned other things as well. Looking at the negatives of a research task is that it’s very time consuming and tiring. This however has taught me to start working on my projects as soon as I receive them and not wait a couple of days before the due date.

I have learned some things about myself during this research like I need to take responsibility for my decisions and my actions as every decision you make has implications. Doing this research also showed me that in life, should it be for business decisions or personal decisions, you need to research before you just go ahead with your idea as research can put you on the correct road going forward.


In conclusion, I strongly believe that vehicle insurance should become a necessity and not a luxury in South Africa because driving with an uninsured vehicle has a huge financial impact on all. The fact that only 35% of registered vehicles are insured should be a concern for government as this has an impact on our country’s economic growth and development. We should make car insurance a must by implementing a new law on owning a vehicle. This has already been done in so many other countries for years and has been successful and therefore we should look at their laws and modify it for South Africa to fit our people and their needs.

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