Minimum Security Requirements for Motor Vehicle Insurance

Insurance is all about managing risk, and when it comes to motor vehicle insurance the two most important aspects that affect the risk posed by you as a potential or existing client, in insuring your motor vehicle, are the type of vehicle and the area in which you live. If you for example, drive what is considered to be a high-risk vehicle and you live in what is considered to be a high risk area, you may not only pay a higher premium in respect of your motor vehicle insurance, but you may also be required to install security measures as a minimum requirement.

These security measures are more often than not early warning/active tracking devices that must be fitted in order for you to enjoy theft cover for your vehicle. Failure to adhere to the minimum security requirements will see you forfeit cover in respect of theft and hijacking and be unable to claim should such a loss occur. As an example, it has recently been reported that one of the large insurance companies now, in an effort to curb increased risk, requires the fitment of approved early warning/active tracking devices on higher-risk vehicles by clients living in specific areas by 15 April 2023.

This was due to a rise in the number of insurance claims for certain vehicle types due to theft and hijacking, and policyholders who do not comply, will no longer be insured against theft and hijacking.

Case Study: CD v P

The Complainant had insured his Toyota Fortuner on 27 September 2021. On 01 April 2022, the vehicle was stolen, and the complainant filed a claim against his short-term insurance policy. The insurer however rejected the claim on the basis that complainant did not comply with the minimum security requirements as the vehicle was supposed to have been fitted with a tracking devise.

The complainant’s vehicle was not fitted with a tracking device at the time of the loss. The complainant claimed, that he was never informed of security requirements for his vehicle or that noncompliance would result in him not enjoying cover in respect of theft and or hijacking. The complainant therefore approached this Office for assistance in having this matter resolved.

In its response to our initial correspondence the respondent claimed that it had submitted the revised policy schedule and product provider policy wording to the complainant via return e-mail on 28 September 2021, and that it had clearly reflected the Toyota Fortuner’s security details stating the presence of a tracking device and immobilizer.

The respondent argued that the policy schedule explicitly stipulated that the Broker must be informed of any discrepancies within 31 days after the print date of the policy schedule, after which the broker will not be liable for errors or omissions. According to the respondent, the information contained in the policy schedule and policy wording provided to the client at the time were clear and concise.

The respondent did however admit that the specific security requirements had not been highlighted to the complainant, but remained of the view the policy schedule and policy wording sent to the client’s e-mail address was sufficient to ensure that he was aware of the requirement for a tracking device.

The matter was then escalated in terms of Section 27(4) of the Financial Advisory and Intermediary Services Act, and this Office responded that the respondent had not taken reasonable and diligent steps to alert complainant to the tracking device requirements. This was even admitted to by the respondent, and despite its claims that the provision of a policy document/schedule was sufficient, merely providing the complainant with a policy wording.

does not comply with Section 7(1)(cii) of the General Code of Conduct for Authorised Financial Services Providers and Representatives (‘the Code’). Section 7(1)(cii) provides that concise disclosures must be made of any special terms, exclusions or instances in which cover will not be provided.

Compliance with this section of the Code would then place the client in a position to make an informed decision as is required in terms of Section 7(1)(a) of the Code. The ability to make an informed decision can only be made prior to the conclusion of the transaction, and can never be made post facto by sending a policy wording to a layperson and expecting that person to appreciate the implications of any material terms if those material terms had not even been raised by the FSP during tits interactions prior to the conclusion of the transaction.

This Office recommended that unless the respondents able to show compliance with the provisions of the Code that it look to resolve the matter with the complainant. The respondent after careful consideration of the correspondence received form this Office made a decision to resolve the matter in full and final settlement, for R644 000, which was accepted by the complainant.

Lessons Learned:

1.) Compliance with the minimum security requirements for one’s vehicle, such as the requirement of a tracking device or early warning system is vital to ensure that one enjoys cover in respect of theft and hijacking.

2.) In addition to installing an early warning system of tracking device, you as the client must ensure that the unit is in working condition. A faulty unit that was not working at the time of the theft or hijacking will jeopardize your claim.