Why your premium increases
Why does my premium increase when I have not claimed?
We insure our clients against the risk of making a claim.
With the:
- increased number of motor vehicles on the road;
- the fact that our road infrastructure has not been expanded or upgraded to deal with the extra traffic;
- the driving inexperience of many new vehicle owners; and
- increasing crime levels.
The risk of experiencing an accident, having your car stolen or being a victim of some or other crime is much higher than it used to be.
Recent weather patterns have also resulted in an increased likelihood of storms, lightning or hail damage.
The costs associated with these claims have increased. So, even though you may not have claimed, the cost of your claims will be higher than a similar claim would have cost in the past. Obviously if you have submitted a claim, your premium will naturally increase.
Why does my premium increase when my car’s value has depreciated?
We update the value of your car on a monthly basis. At a premium review stage, you receive the full benefit of the depreciation in value of your vehicle in terms of your premium calculation. The effect of this benefit is offset against the factors mentioned above as well as others. Were it not for this adjustment in the value, the increase you receive would be higher.
The value of a vehicle is a factor only in the case of a stolen vehicle and accident claims where the vehicle is written off. These claim types account for less than 10% of all our motor claims. So, by far the vast majority of vehicle claims result in repairs which are not influenced by the fact that the vehicle has depreciated. In fact, the cost of repairing a vehicle this year will be substantially more than the cost at the same time last year, even though that vehicle may have depreciated by as much as 10-15%.
Repair costs have increased significantly due to a host of factors:
- The rand has depreciated against major currencies which impacts on the cost of spare parts.
- Cars these days include more and more advanced safety features and electronic gadgetry e.g. even base model vehicles are fitted with expensive airbags. Due to this, and as requested by vehicle manufacturers, panel beaters are required to purchase expensive equipment to ensure an acceptable level of repair quality. This investment in capital, and the related costs associated with training staff to use this new and advanced equipment translates into higher repair costs.
In summary, the price of parts to replace safety features like airbags and electronic gadgetry is resulting in substantial increases in repair costs for even minor collisions.
Many of the vehicles are imported meaning that spare parts have to be imported.
There are numerous make and model options on our road today, and we have noticed that the availability of spare parts for these vehicles are limited. The average age of vehicles on our road has also dropped significantly, resulting in an impact on spare parts’ availability.
Why does my No-Claims discount reduce after an accident claim when I was not at fault?
Who is at fault is not the issue. When you submit a claim there are various associated costs e.g. the cost of replacing or repairing the asset in question and the cost of administering the claim.
Some may argue that they pay a premium to cover these costs. This is true, but by reducing the No-Claims discount following a claim, we are able to ensure that those who have not made a claim do not cross subsidise clients who have claimed.
If a client claims for an accident where he/she was not at fault, we may or may not be successful in recovering the cost of the repairs. Even if we are successful in recovering the cost of the repairs, we are not able to recover the abovementioned claims administration costs. We are also not able to recover the costs associated in recovering the repair costs from the guilty party.
Typically, if we are able to recover the repair costs from the guilty party, it is not the full repair cost. The vehicle accident law allows for a portion of blame to be ascribed to what we in everyday terms would consider the innocent party as it states that all road users have a duty to be on the look-out for and to take necessary steps to prevent collisions with other, possibly negligent drivers. We hope that these questions and answers will provide you peace of mind in understanding the increase in our premiums a bit better!