Even when vehicle valuations are reduced, there are the ever-increasing costs of repairs and some protective practices by the motor vehicle industry.
For example, most motor vehicle companies insist that warranties will be valid only if you use their branded car spares for repairs (and often only if you use their preferred repair shops). As everyone knows, if you had to build a motor vehicle using the vehicle manufacturer’s spare parts, you would probably pay about 10 times or more (an estimated figure, but probably not far off the mark) than the vehicle would cost off the shop floor.
When calculating the premium to provide comprehensive cover on the actual value of a vehicle, the following factors are considered:
- The probability of the insurer having to pay out the full (reduced) retail value to replace a car that is written-off in an accident or stolen. The actual retail value of the car has a direct bearing only on cover for replacement but not on the other factors taken into account in calculating premiums.
- When an annual renewal is performed, the retail value of a vehicle is reduced (in line with the Auto Dealers’ Guide) and this adjusts the premium in accordance to the amount needed to cover the replacement.
But, there are other factors to take into account:
- The probability of an insurer having to repair the car following an accident (and the likely severity of the accident and damage caused). This includes damage to a car’s windscreen;
- The probability of the policyholder being found liable for damage to a third party’s property;
- The standard amount of liability cover included in a policy for comprehensive cover is R5 million;
- Increases in vehicle part prices (with imported parts further affected by exchange rates);
- Increases in paint prices; and
- Increases in labour rates charged by panel beaters.
The premium needed to replace a written-off or stolen car constitutes a rather small portion of the total premium paid by a client.
The cost of accident repairs and liability claims make up the bulk of your insurance premium.
Even the internal costs of an insurer to administer a policy increase over time.
As a consequence, most motor vehicle owners who are comprehensively insured “still incur an increase in their car insurance premiums every year, even though the car’s retail value has reduced.”
Contact G and S Insurance Consultants today for assistance in your vehicle insurance.