Some neat tricks to reduce your motor insurance bill
There are a many factors affecting profitability in the short-term motor insurance industry. These include the rising cost of vehicle repairs, increasing number of motor vehicle accidents, general lawlessness among South Africa’s road users and the worryi
A short-term insurance policy holder hoping to maximise the savings on his/her short-term insurance policy must consider both premium and claim. Instead of obsessing over possible savings on monthly (or annual) premiums they should consider the potential savings of being appropriately covered at claims stage. Thus the first step in the insurance consumer’s “savings” exercise would be to ensure each item covered on the policy is correctly valued. The second step should be to conduct a thorough check of the policy document, paying special attention to the conditions, exclusions and excesses on the policy.
Reducing insurance premium for high risk insured
Christelle Fourie, Managing Director of MUA Insurance Acceptances, offers some useful advice for parents wanting to insure their children’s first vehicle. “Many parents opt to simply put their children onto their own insurance policies and pay the premium for them,” she said. “However, we have seen a number of cases where children who are well into their thirties are still on their parent’s policies and continue to have their premium paid!” This approach could have a negative impact on the parent’s claim history and create unnecessary delays in adult “children” accepting responsibility for their own insurance.
The problem most children face is the cost of standalone vehicle insurance. Young drivers are an extremely high risk category. Statistics show drivers between the ages of 16 and 21 (US drivers can obtain licences from age 16, while South Africans can drive with a learners licence from 17 years) are ten times more likely to be involved in an accident than those aged 30 to 59. The typical newly-qualified (young) driver pays up to three times more for motor vehicle insurance than older and more experienced road users! “But it’s still best to let children take out their own insurance cover as soon as they acquire their first car, even if this proves to be an expensive exercise,” says Fourie. The idea is for young drivers to take responsibility for their driving from an early age and build their own “no claims” track record as early as possible.
It’s an interesting concept. At first glance Fourie’s appeal seems self serving – an industry expert calling for parents to generate additional premium by forcing their kids to sign up for their own insurance. But on closer inspection it makes perfect sense. It forces all insured drivers to pay appropriate risk premium and will hopefully instil driver discipline from an early age! If parents want to assist their children with affordable insurance it might be better for them to fund a higher voluntary excess. Says Fourie: “Some insurers offer a premium discount if the insured chooses an additional voluntary excess – and parents should rather assist their children by funding this excess during the early years of insurance.”
Reducing premium with tracking devices
Tracking devices are becoming popular tools in the short-term insurance space too. Not only are they useful for mitigating risk of motor vehicle theft and hi-jacking, but they’re becoming increasingly popular in driver behaviour policies. Although not explicitly used by insurers such devices could prove invaluable in “pay as you drive” type policies. If you obey speed limits, avoid late-night driving and stick mainly to short distances outside peak times you’re apparently a “good” risk.
“How, when, where and how far you drive has a direct influence on your risk of being involved in an accident,” reckons René Otto, CEO of direct short-term insurer MiWay. The group’s MiDriveStyle product (launched in 2009) introduced individualised premiums based on each customer’s unique driving behaviour. “MiDriveStyle and behaviour-centric solutions are ideal for people in certain categories that have traditionally been seen as high risk,” observes Otto. Students and young adults can now prove they deserve lower premiums than their higher-risk peers.
The risk to insurers (and brokers selling tracker-linked policies) is to ensure clients are made aware of the purpose of the tracking device at policy inception. There have been cases where the Short-term Insurance Ombudsman has overturned insurer decisions to refute claims on tracker evidence.
Editor’s thoughts: Modern vehicle tracking solutions are about so much more than vehicle recovery. These devices can monitor monthly distances travelled, destinations visited and speeds achieved. They’re a bit like the big brother of the roads... Would you be happy with an insurer using trip data from a tracking device installed in your vehicle? Add your comment below, or send it to [email protected]
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