Manage your risk to limit premium increases
High inflation, the current crime situation and accidents coupled with natural disasters inevitably translate into short-term insurance premium increases, but by understanding the issues that drive premiums up and by managing these risks consumers are able to keep premium increases to an acceptable level.
This is the view of Christelle Fourie (pictured), Head of Personal Lines Underwriting at Santam, the country’s largest short-term insurer. She notes that premium increases may be implemented at the renewal of the policy, during adjustments of insurance cover, or after a 30 day notice period.
“Depending on the causes of increased claims costs, insurers might effect premium increases on all clients, a specific geographical area or a specific insurance class (such as motor vehicles). Insurers may also differentiate the percentage increase based on the claims history of a client and the number of years the client has been insured. At Santam, however we assess each client on an individual basis rather than applying blanket increases,” she says.
She notes that motor vehicle insurance claims costs have increased significantly over a number of years as a result of the higher costs of repairs relating to accident claims. This is also partly related to the rising number of imported vehicles on the roads, the advanced technology used in new vehicles, and high inflation. Other contributory factors include the increase in the number of vehicles on the road generally, the deterioration of the road infrastructure and the lack of driving skills of many new vehicle owners.
“With profitability on motor vehicle insurance under constant pressure, insurers have been forced to increase rates, and to price vehicles more accurately in accordance with such factors as repair costs per manufacturer, vehicle model and so on. However, consumers can influence such rate increases by realising that the value of vehicles depreciates over time, and by ensuring that the sum insured on their vehicle is adjusted accordingly. It is important to keep in mind that claims are settled on the current market value of the vehicle and not the sum insured,” she says.
With regard to non-motor insurance, Fourie says that the current stabilisation of criminal activities will counter the cost of rising inflation to some extent and should result in less than expected premium increases on household contents- and all risks insurance policies. Unfortunately, building and contents insurance will also be negatively impacted by changes in weather patterns, which have resulted in a drastic increase in weather-related claims over the last two years.
Fourie’s advice to consumers is to review their risks and insurance on a regular basis, and to consult a broker for any assistance they may require in managing their risk.
“At Santam, we offer a valuation exercise on buildings and contents, to eliminate the risk of under insurance. In addition, Santam clients can take advantage of a dedicated service that will advise them of home and business, vehicle and personal safety service providers in their area. They will be contacted within 24 hours with details of the relevant service providers, and will benefit from discounted prices – up to 30% off normal prices – negotiated by Santam on their behalf,” she says.
To limit premium increases, she also recommends that consumers ensure that their risk improvements, such as burglar alarms, are noted on their policies, that they regularly review the specific items on their all-risks policies to ensure that these remain relevant and to cancel any items that are unnecessary, and to consider a compulsory excess.
“After 90 years in the short-term insurance business, Santam understands that it is all about managing the level of risk that accords with each individual’s particular lifestyle choices, and determining the appropriate cover that matches these choices. Risk management is the most effective way to manage short-term insurance requirements, including premium increase,” she concludes.
