The insurance industry has warned that the proposals to change the Road Accident Fund could lead to increases in private accident insurance.

The insurance industry has warned that the proposals to change the Road Accident Fund could lead to increases in private accident insurance.

CARtoday.com reported on Wednesday that the Satchwell Commission of Inquiry had recommended that the bankrupt Road Accident Fund be replaced by the Road Accident Benefits Scheme.

The new system will run like a social-security scheme. The commission has recommended that payments should no longer be paid out in a lump sum but periodically, and in line with actual medical expenses and income lost.

Judge Kathy Satchwell recommended introducing a "no fault" principle and capping the amount of compensation that an injured person could receive for any particular injury. But those injured would retain their right to sue for the balance of damage suffered.

The South African Insurance Association (SAIA) said the insurance industry will then face far more claims than before. “This will impact on either the costs of insurance or on the type and extent of cover provided.

“The insurance industry will need to consider all these issues to ensure that it is suitably positioned to meet the needs of its clients as affordably as possible,” said SAIA executive Caroline da Silva.

She said that the insurance industry will need to create products to cater for this need.

“The first thing the motorists must be aware of is that because the benefits proposed by the commission are capped at a certain level the compensation will in all likelihood be insufficient for many privately insured motorists.

“In order to protect themselves more fully, insured parties may need to buy private cover in the event of being injured in a car accident. This cover would compensate the injured person over and above the compensation paid by the RAF if the commission’s proposals are implemented,” said Da Silva.

The commission’s proposals are being considered by the Department of Transport and the insurance industry said it will be keeping a close watch on any developments.

Original article from Car