Increased Car Sales Good for Short Term Insurance

June 28 - The growth in the number of new cars sold in South Africa in recent months will have a positive affect on the car insurance market, which in turn will affect the larger insurance sector.

This is the opinion of Christelle Fourie, the Managing Director of MUA.

"Motor insurance makes up for 60% of the total personal lines business in the country," said Fourie. "Therefore, an increase in demand for car insurance is seen as a good gauge for determining the prospects for the rest of the short term industry."

Compared to May 2009, new car sales jumped by 35%. The National Association of Automobile Manufacturers also said that sales on a year-to-date basis were nearly 25% ahead of the first five months of last year.

Improved financial conditions meant that "South Africans are starting to spend on big ticket items again," said Fourie.

Traditionally, when South Africans purchase new cars, they tend to review their car insurance policies.

As such, Fourie believes this is the perfect opportunity for insurance groups to capture new business by offering competitive prices and interesting products.

"We have seen a significant increase in new business quotation requests, which we believe is largely due to the upturn in demand for new vehicles," said Fourie.

Another executive in the business, Guy Scott of Aon Risk Services echoed Fourie's sentiments.

He also said that car accidents make up a large percentage of claims and the group was "seeing an increasing amount of claims regarding other motor vehicle related incidents, including the high cost of imported vehicle parts and increasing costs for repairs."