One issue that I believe is not given enough attention in South Africa is the position of foreign driving licences once a person has been granted permanent residence. Many people who come to South Africa from Zimbabwe, Zambia, Malawi, Mozambique, Botswana, Namibia, the United Kingdom and other countries continue driving using their original foreign licences because those licences are valid in their countries of origin and are generally recognised in South Africa. The problem starts when the person’s immigration status changes and they become a permanent resident.
According to the South African Government’s current guidance, a person who has been granted permanent residence must convert their foreign driving licence to a South African driving licence within one year of receiving their permanent residence permit. The same government guidance states that if the person fails to convert the licence within that period, the foreign licence will be regarded as invalid.
From a short-term insurance perspective, this is not simply a traffic-law issue. It can become a very serious insurance issue, particularly when the person is driving an insured motor vehicle and is involved in an accident.
This is where I believe many motorists and even some people arranging insurance do not fully appreciate the risk. When a motor policy is issued, one of the fundamental questions an insurer is interested in is whether the person driving the vehicle is legally authorised to drive the particular class of vehicle. The fact that an insurer accepted a foreign driver’s licence when the policy was originally taken out does not necessarily mean that the same licence will remain valid indefinitely after the person’s legal status in South Africa changes.
For example, imagine somebody who has been living in South Africa for several years on a temporary residence permit. They have a valid Zimbabwean driver’s licence and purchase a vehicle in South Africa. They disclose their Zimbabwean licence to the insurer and obtain comprehensive motor insurance. There may be absolutely nothing wrong with that arrangement at the time, depending on the circumstances and the policy wording.
Five years later, however, that person obtains permanent residence. They continue driving using the same Zimbabwean licence without converting it. They then have a serious accident.
This is where the problem becomes much bigger than simply receiving a traffic fine. During the claims investigation, the insurer will establish the driver’s immigration status, the date permanent residence was granted, the validity of the foreign licence and whether the driver complied with the South African requirements applicable to permanent residents. If the foreign licence was no longer legally valid at the time of the accident, the insurer may raise the issue of an unlicensed driver or breach of the policy terms.
That can potentially result in repudiation of the claim, depending on the wording of the policy and the facts of the particular loss.
There is an important distinction here which I think motorists need to understand. Not every problem with a driver’s licence automatically gives an insurer the right to reject a claim. South African insurance law has repeatedly recognised that exclusions and policy conditions must be interpreted in the context of the actual policy wording and the circumstances of the loss.
A useful example is Santam Limited v CC Designing CC, where the court dealt with a so-called reasonable precautions clause. The court held that ordinary negligence was not, by itself, enough to exclude liability under such a clause; recklessness was required. This principle has subsequently been discussed in South African insurance jurisprudence, including Renasa Insurance Company Limited v Watson.
But there is an important difference between simply saying that a driver was negligent and saying that the driver did not hold a valid licence required by law or by the insurance contract. Where the policy contains a specific requirement that the driver must hold a valid driver’s licence, the insurer may have a much stronger contractual argument.
This issue has actually been considered publicly by the Ombudsman for Short-Term Insurance. In a published discussion concerning foreign licences, the Ombudsman pointed out that South Africa recognises certain foreign and international driving licences but specifically noted that the position becomes problematic when a person obtains permanent resident status. The publication stated that South African law requires the foreign licence to be converted within the prescribed period after obtaining resident status. More importantly from an insurance perspective, the Ombudsman explained that when dealing with a rejected claim based on the absence of a valid driver’s licence, the insurer would need to demonstrate the relevant circumstances and prejudice in determining an equitable outcome.
There is another interesting publicly reported case involving a Zimbabwean national which demonstrates why foreign licence disputes can become complicated. In that matter, an insurer rejected liability following an accident involving a Zimbabwean driver who was using an international driver’s licence. The insurer argued, among other things, that the foreign licence could not authorise the driver to operate a South African-registered vehicle and questioned the validity of the international driving permit. The insurer was unable to substantiate its argument that the international permit was invalid, and the matter was referred to the Ombudsman for Short-Term Insurance.
For me, this case illustrates an important point: insurers cannot simply repudiate a claim because a driver’s licence is foreign. The actual legal status of the licence, the driver’s circumstances, the policy wording and the facts surrounding the accident all matter.
At the same time, the opposite is equally important. A motorist should not assume that because an insurer previously accepted a foreign licence, the insurer has automatically agreed that the licence will remain valid forever. The responsibility for complying with the law does not disappear simply because insurance has been purchased.
This is why I believe brokers have an important role to play.
When dealing with clients who are foreign nationals, particularly clients who have recently obtained permanent residence, the driver’s licence should form part of the risk conversation. It should not simply be a question of obtaining a copy of the licence and putting it on file.
The broker should establish what type of residence status the client has, when permanent residence was granted, what country issued the driver’s licence, whether the licence is still valid, what class of vehicle the licence authorises the person to drive and whether the licence needs to be converted into a South African licence.
The reason is simple. Insurance is ultimately about transferring risk, but the risk must first be properly understood and disclosed.
A motorist may have a vehicle worth R300,000, R500,000 or even R1 million. They may be paying thousands of rands every year for comprehensive insurance. They may believe that because their debit order is going through every month, they are fully protected. But if there is an accident and a fundamental licensing issue is discovered, the real question becomes whether the policy responds to that particular loss.
This is also why I would encourage insurers and brokers to ask the question at inception and again at renewal: “Has your residential or immigration status changed, and are you still driving on the same foreign licence?”
It is a simple question, but it can prevent a very expensive problem.
There is also a practical issue which needs to be recognised. Converting a foreign licence is not always as straightforward as people think. The South African Government requires various documents, including proof of permanent residence, the current foreign driving licence, proof relating to the validity of the foreign licence and, where applicable, a translation and confirmation from the relevant licensing authority. The government guidance indicates that an applicant does not ordinarily have to undergo a full driving examination for the exchange, although an eye test is conducted.
Therefore, if someone obtains permanent residence, there is very little reason to simply ignore the licence conversion requirement until an accident occurs.
From an insurance perspective, prevention is always better than repudiation.
A repudiated claim can have consequences far beyond the damage to the insured vehicle. If the accident involves another vehicle, property, serious injury or death, the financial exposure can become substantial. What initially looked like a simple R100,000 motor claim can potentially turn into a much larger liability dispute.
I also believe that this is an area where clients sometimes blame the insurer after a claim is rejected, when the real problem started much earlier. Insurance companies are not immigration advisers and brokers are not traffic authorities. Ultimately, the motorist has a responsibility to make sure that they are legally entitled to drive.
At the same time, insurers must also apply their policy wording fairly and consistently. A foreign licence should not automatically be treated as invalid merely because it is foreign. The insurer must look at the law applicable to the driver, the actual status of the licence and the contractual terms governing the policy. The publicly reported OSTI matters show that these questions can be more complicated than simply checking whether the licence is South African.
My advice to anyone who has recently obtained permanent residence in South Africa is therefore very simple: do not wait for an accident before checking your driver’s licence status. If you are required to convert your foreign licence, start the process immediately and keep proof of your application and supporting documents.
And if you are insured, tell your broker about the change in your residency status.
The cheapest part of insurance is often the premium. The expensive part is discovering at claim stage that there was a legal or contractual problem that nobody addressed when the policy was being arranged.
As brokers, we should not only be looking at the value of the vehicle, the premium, the excess and the insurer. We should also be asking whether the person behind the steering wheel is legally entitled to be there.
That small check could make the difference between a paid claim and a repudiated claim.