Actuarial & Insurance news
Ways to reduce insurance premiums
Many consumers may unknowingly be paying more than they should for their car insurance - often one of their biggest short-term insurance payments - due to a failure to assess the value of their vehicle when it comes time for annual insurance policy renewals.
Christelle Fourie, managing director of MUA Insurance Acceptances, says that unless otherwise instructed, some insurance companies will continue to charge the same premiums for the original value of the vehicle even though it is a few years older and has far more mileage on the clock.
"By conducting a yearly valuation of the motor vehicle before renewing the insurance policy, consumers could in fact save money on their motor insurance," she says.
"It is a fact that every year the value of a vehicle depreciates.
"For example, the original purchase price of a 2009 model BMW 320i was about R315,500, but in 2012 the value of the vehicle would have depreciated to an approximate market value of R245,900.
"As a result, the insured should update the value of the vehicle with their insurer as they could end up saving as much as 20% on the premium just three years down the line."
Fourie says that in addition to conducting yearly valuations, there are other ways consumers can reduce their car insurance premiums.
"South Africa is a consumer market, which means most insurance companies and their brokers are open to negotiation.
"If consumers are looking for additional ways to reduce their monthly premiums, they should consider asking their insurance provider whether they can pay a higher excess for lower monthly fees."
However, Fourie says that any consumer who does opt to increase their excess should first speak to their broker to consider whether they will have sufficient funds to pay a higher fee if they are involved in an accident.
Aon Personal Product Solutions, in studying its own claims trends, has established that drivers older than 55 are better risks, allowing them to enjoy the privilege of no excesses in the event of a claim.
From Aon's statistics, women have more accidents than men, but men tend to incur larger claims.
"That's bound to fuel the endless debate about the relative merits of men and women drivers, so read into that what you may - and our experience is not necessarily the same as other insurance brokers'," says Mandy Barrett of Aon Personal Product Solutions.
"Either way, these trends, both in broad terms and individually, do have a bearing on how underwriters view the risk they are taking on.
"The type of car you drive and even the use to which you put it and who drives it (a regular driver or otherwise) influences your rating, while some vehicles are more popular with car thieves than others.
"And remember that the cost of parts replacement and whether the vehicle is manufactured locally or not impacts on repair costs and therefore on the rating of a premium.
"The good news is that you can take steps of your own to alter your insurance risk profile by, for example, the frequently suggested expediency of raising the security levels around your home and installing additional security devices in your vehicle.
"Another part of the equation is full disclosure of your personal risk details and your insurance history to allow your brokers and insurers to correctly scope an accurate assessment of your insurance needs and indeed to avoid possible claims rejection," says Barrett.
She says managing your own risk is important and an insurance needs analysis, completed together with your broker, is the tool that makes it possible to arrive at the most cost-effective insurance solution. Ultimately, the objective is not to over or under-insure and to seek economies where they are to be found.
Fourie says another way for consumers to reduce insurance premiums is to incorporate some form of vehicle tracking technology.
"Insurers often charge lower premiums for those vehicles with tracking technology as the car falls into a lower risk bracket as it will be easier to recover should it be stolen or hijacked. Similarly, drivers who fit alarms or immobilisers to their vehicles could also benefit from lower premiums.
"Some insurers also offer reduced premiums for drivers who attend advanced driving courses because this improves the skills of the policyholder and reduces the likelihood that they will be involved in an accident."
Fourie says ensuring the motor vehicle is parked in a secure location is another useful way to reduce insurance premiums.
"Vehicles stored in a locked garage with additional security measures, such as an electric gate or electric fencing, again present a lower risk.
"Each insurer's premium is usually dictated by the underwriter's risk assessment of the insured's particular risk bracket and while consumers cannot always change certain factors that may determine premiums - including age, gender and driving history - there is often room for negotiation, so it is best to consult directly with a broker on how to reduce motor insurance premiums," says Fourie.
She says a further factor is that, as our middle class expands, a greater number of drivers are able to afford powerful vehicles which, arguably, they are less equipped to manage on the road.
Barrett says: "At the end of the day, it's all about demographics and economics.
Fortunately, the response of the insurance industry is to assess individuals scientifically and to establish that, as underwriters, they have an actual 'insurable interest'," she added.
Source: Business Day via I-Net Bridge
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