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September 2nd, 2016 by


When your insurance premium is costing almost as much as your car installment, you are sure to start wondering what exactly you are paying for.

With this in mind, we conducted research to determine why car insurance is so expensive and why premiums can vary wildly.

In fact, the premium on a 2015 VW Polo for a young man can be anywhere between R800 and R1600 for the same cover.

DID YOU KNOW? An independent broker can offer you informed advice on the best car insurance policy for your needs. CLICK BELOW to save on your monthly premiums.

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Here Are the Factors Affecting Your Car Insurance Premium

1) Costly to Import Replacement Parts

A lot of car replacement parts are imported because most makes and models are not manufactured in South Africa.

With the rand being quite weak against the dollar, this means that they increase in cost by more than inflation year-on-year.

In fact, some parts increase by as much as 30% or more every year. 

Some insurance companies will make use of second-hand or ‘alternative’ parts to repair vehicles which work out cheaper. For new cars under motor plans, this is usually not possible as it voids the warranty.

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2) Not Enough Cars Insured in South Africa

Actuaries pool risks in order to price them, and the car insurance pool in South Africa is extremely small. While there are plenty of car insurance companies in South Africa, only a third of the ten million cars on our roads are insured.

If third party motor insurance becomes compulsory then it may well drive down motor insurance premiums.

However, this will not happen for a long time, as stakeholders are still rallying for its inclusion on government’s agenda. This also means that if your vehicle collides with another uninsured vehicle, your insurance company will not be able to recover any monies.

As a result, it is harder for the insurance provider to stay afloat, and ramps up premiums.  

3) High Road Accident Rate

South Africa has some of the highest rates of road accidents in the world. This is due in part to lack of law enforcement, but also to drivers’ cavalier attitude to safety, and high rates of alcohol abuse.

When an actuary works out your premium, they will be aware that as a young male, for example, you have a high risk of being involved in a car accident.

High risk = high premium.

4) High Rates of Hijackings and Theft

car hijackings

As if 4500 road deaths a year wasn’t a depressing enough thought, South Africa also has a high rate of theft and hijackings. So much so that an insurance company in Botswana told me that the only car-related crimes that happen there are caused by South Africans crossing the border and stealing vehicles!

Therefore, if your car is not locked away at night, it will increase your premium.

5) A Cut-Throat Competitive Landscape

Competition is normally a good thing for consumers, as it has a tendency to drive down prices, but as mentioned insurance risks are pooled.

Smaller insurance companies may need to charge high rates to stay afloat because they fight for their business.

On the other hand, bigger insurance companies have more people from which to collect premiums. In this way,  the non-claimants balance out the claimants.

You can also negotiate with larger insurers to cut their rates in order to keep your business.

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6) Abuse by Repairers

You’ve heard some doctors happily over-prescribing treatments or scripting up the most expensive drugs, without thinking about how it bites into the profit of medical aids. Car repairers do the same, using the most expensive parts when repairing a car, because the manufacturer gives them an incentive in the form of a rebate.

These days certain insurance companies are partnering up with car repairers so that it is a mutually beneficial arrangement, as are medical aids and doctors.

Despite this, abuse by repairers at times inflates repair costs. And as insurance companies have more expenses as a result, they pass these high costs down to consumers in the form of high premiums.

7) Strict Regulations

Insurance companies are much more strictly regulated now than they used to be, and, therefore, they invest money in people and technology to comply with this regulation. This puts strain on their bottom line, which in part is passed down to the consumer in the form of a high premium.

On the upside, consumers have many avenues to use when they want to lodge complaints.

With premiums differing wildly and car insurance companies inclined to overcharge where they can, you really need to ensure you compare quotes before committing to a car insurance policy.

CLICK BELOW to get our independent broker to call you, quote and find the best insurance at no extra cost. They will investigate and see if they can find car insurance that saves you money and gives you similar benefits.

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  • Helen Stevens

    My ten-year old car was involved in an accident when a bakkie ran into the back of it while my car was stationary. It was a complete write off, the only damage to the bakkie was my car’s paint on its bull bars. My car was fully insured, but my insurance company paid out only half of what it would cost to replace my car with a similar one. I had to opt for an older, cheaper car. I felt that I had been ripped off.