Insurance. The word inevitably evokes imagery of tedious paperwork, lengthy telephone calls, strict procedures, debit orders and all the modern anxiety that accompanies any lifelong commitment.
What if we were to tell you that insurance can be incredibly fascinating, though?
Where did it all begin? The very idea of risk management can be traced back hundreds of years, all the way back to Chinese traders who, travelling along treacherous river rapids, would cunningly distribute risk by spreading their wares across multiple vessels. In doing so, they lessened the chances of losing absolutely everything on one single boat in the event of capsize or robbery.
But, let’s get official. According to Insurance ZA, the earliest authenticated insurance contract was, in fact, a marine insurance contract written in Italian. It appeared in the form of a maritime loan aboard a ship called ‘The Santa Clara’ dated 1347, in Genoa.
These types of insurance contracts commonly took the form of a fictional sale or loan, in which trading capital was loaned to travelling merchants, and the risk of loss due to robbery in transit or any other threat was borne by those who provided that loan. In return for undertaking this risk, the lender would add an exceptionally high rate of interest.
When it comes to the origins of life or health insurance, we may look to the Greeks and Romans, who were known to form organised societies that afforded its members certain benefits. In return for these benefits, which could have included, for example, paying for a member’s burial upon death, members were required to make regular contributions to the society.
Before long, the idea of modern insurance spread through the European continent and reached England, where it slowly evolved into the form we’re familiar with today, complete with 2-hour long, terribly-acted infomercials.
According to World Insurance: The Evolution of a Global Risk Network, the first South African insurance company, the Zuid-Afrikaansche Brand en Levensverzekering Maatschappij, was founded in December 1835.
By 1861, over twenty insurance companies were operating in the Cape and, by the turn of the century, that number had grown to over fifty.
Insurance has evolved with us, born of necessity, as a helping hand in the face of tragedy. Illness, injury, death, theft, destruction, loss. These pose as great a risk to us today as they ever have, and protection from risk is as vital now as it was hundreds of years ago along those treacherous river rapids.
So, now we may know where insurance began, but many among us still don’t know what modern insurance can do for us, or what we’re actually paying for, or how to tell fact from fiction in an ever-evolving world.
In this article, we’ll have a look at some of the more common myths surrounding insurance, as well as offering tips to help you to get the best out of your policies.
We started this article off by listing the inevitable, negative imagery that many people associate with insurance. Fortunately, it is now easier, faster and more affordable than ever to acquire quality cover. So, why are some people still hesitant?
A lot of the uncertainty can be attributed to the myths and misinformation surrounding the industry. You may possibly have heard something along the lines of:
These are all, of course, untrue, and though high levels of risk may present their own difficulties, almost anything can be insured, and all important things should be.
Other misconceptions border on the delusional. One of these includes the common misbelief that the colour of your car plays a role in your premium costs. It has been said that those who drive red or black cars will pay more for car insurance than others, due to a propensity for speed, reckless driving, or low visibility at night.
In truth, however, insurers couldn’t care less about the colour of your vehicle. They’re much more concerned about the make and model of the vehicle, where you live, the amount of driving you do, your age, your marital status and whether or not you have a track record of ploughing your car into other people’s property. These details all factor into how much of a risk you may pose, and are used to calculate the cost of your premium accordingly.
Likewise, many people are under the impression that a history of speeding fines will increase the cost of your premiums. In South Africa, speeding fines have absolutely no bearing on car insurance premiums. Driver behaviour, however, has begun to play a pivotal role in understanding the nature of modern risks, and the development of new insurance products to protect against them.
A good example of this can be found in insurance companies that use telematics devices to track the way motorists drive, and reward them with lower premium rates for exhibiting good driving behaviour.
Let’s take a look at a couple more myths and misconceptions surrounding insurance.
In South Africa, unlike many countries in the world, you are not required by law to possess car insurance. Due to the fact that a staggering 70% of the motorists on our roads are entirely uninsured, however, combined with our high level of road fatalities, and the fact that the Road Accident Fund is currently such a mess, there has long been intense lobbying for the government to introduce compulsory third-party car insurance.
Rumours have circulated for some time that insurance companies are keeping tabs on our social media accounts.
This is both true and untrue, in the sense that insurance companies do not constantly monitor our social media accounts. These accounts may be investigated, however, in the gathering of information following application for cover, as well as when you claim, and particularly when fraud has been suspected.
Insurance is, at the end of the day, a gambling game. Cheating is frowned upon. Policy holders who submit inflated or deceitful claims make everything more difficult and more expensive for the honest folk, and so, the verification of information by fair means is for the protection of all truthful clients, as well as the insurer.
Due to the fact that we surrender our right to a certain amount of privacy when we take to the internet, and particularly social media, this allows outside parties, such as insurers, to access that information when needed.
Insurance companies are not permitted to cross a line, however, and infringe upon your privacy rights. They’re not allowed to sneak around or gather information in underhanded ways, such as hacking or wire-tapping.
Their primary source of information has, and always will be, that which you provide them with during the application or claims process.
The age of your car rarely has any bearing on determining the cost of your insurance premiums. The value and condition of your vehicle, however, does play a big role. This is largely due to the value and availability of spare parts for that vehicle. Luxury vehicles require expensive parts. Rare vehicles require rare parts.
Your more affordable, common vehicles are cheaper to insure because parts are readily available, and easy to source.
The age of the driver, however, does matter, and so does the gender and marital status. Statistically, the older the driver, the more experienced they are at driving. Young men, in particular, incur higher premiums, due to their natural propensity toward reckless or aggressive driving.
People who are married, or who have children, tend to drive far more slowly and carefully. They’ve put those Vin Diesel days behind them, and their risk profiles are far more manageable.
Of course, these are just some of the many myths and misconceptions surrounding insurance. We hope that we cleared some up.
At the end of the day, insurance has and always will be one of those products in which the true value only becomes evident in the moment of need. In order to get the most out of it, we need to understand exactly what we are paying for, what we get in return, and what the limitations are. How can it benefit you? How can it save you from catastrophe?
When unsure, speak to your broker, ask questions, ask more questions, and ask even more questions, until you are absolutely satisfied.
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