An insurance policy is an essential purchase if you are a car owner and it comes with the peace of mind of knowing that, should your car get damaged or stolen, you would be covered from heavy financial loss. It runs on a month-to-month basis; however, you can exit it at any time by giving sufficient notice.
At some point, usually after a year, it will come up for renewal which means that the insurer will review the policy and may adjust the premium you have to pay.
Renewing your motor insurance is a task that requires careful attention, especially if you are not sure what the jargon and clauses mean in simple and practical terms, and also if you are unaware of the factors that affect the outcomes.
It’s important to remember that it's possible for your premium to increase when renewing your policy even though the value of the car hasn’t increased. This year might be one of those years when this happens because of the knock-on effects of the Covid-19 pandemic, which affect the cost of insuring your car. These include changes in the cost of labour and the accessibility of car parts, which affects the cost to repair the car, for example.
The repair cost is typically split into three components – parts, paint and labour - and the ongoing global supply chain crisis due to the pandemic makes it more difficult to access car parts for repairs, owing to constraints on the shipping industry and supply and demand pressures. One impact of this is seen in the price of paint, which is said to have increased by at least six percent.
A factor like this impacts the total cost to insure your vehicle, which affects the premium when you renew your policy.
Your insurance premium takes into account the cost of repairing your vehicle if you are in an accident, or the replacement cost in the event of a total loss. The majority of your premium is related to the repair cost for your vehicle since most claims are not total losses. Factors like labour and prices of the car parts going up over the year your car was insured influence the renewal process. This is why customers may occasionally pay more when they renew, even though most people think the premiums are supposed to be cheaper when renewing because of the depreciating value of the car.
MiWay Blink, Keletso Mpisane says, “There has to be a careful balancing act. On the one hand, the car has decreased in value over the last year. On the other hand, if inflation, the cost of labour and the costs of repairs have gone up, they influence the renewal process by impacting the cost to insure the vehicle. This affects the premium. With this in mind, insurers must carefully weigh all these factors up and strike a fair balance between reasonable increases in premiums, meaning fair practice towards the customer, and their business objectives.
“Depending on the insurer, factors that influence how an insurance premium is initially calculated typically include other aspects like your credit history and where you live, for example. The renewal of a policy, however, also takes into consideration other factors like whether you paid your premiums on time over the last year and whether you claimed within that period,” she adds.
Changes in how insurers view your risk may also affect your insurance premium at renewal. For example, insurers may find that extreme weather events are happening more often and premiums to cover the risk of hail need to be increased.
One of the best things you can do when it’s time to renew your policy is to get car insurance that allows you to pay less when you drive less. In this day and age, many people work from home, and so they travel less because they do not have to drive to an office. In this case a client could consider cover that is better suited to their changed needs
A digitally-based insurance service, such as that offered by MiWay Blink, provides a cashback on the premium paid if one drives less than 2 500 km per month. The offering uses technology to assess driving behaviour, including the kilometres driven in a month, and then rewards the customer accordingly.
Go over your existing car insurance policy and research the process involved before you renew it so that you can understand more about how your premium is calculated.
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