Vehicle insurance premiums have been soaring by 10% to 20% a year, adding to the cost of owning a car. Apart from the usual suspects — crime and the high cost of spare parts — reckless driving is becoming a major factor. But should cautious drivers be picking up the tab for the lunatics out there?
Ben Tonkin, corporate and commercial technical committee chair of the SA Financial Services Intermediaries Association (Safsia), argues that insurance premiums should be linked to the number of traffic offences a client has committed.
There is no doubt that there are more cars on the road than ever before. The more cars, the more accidents will occur. But high levels of traffic congestion are also increasing levels of aggression, causing more accidents and pushing up insurance premiums.
“Reckless driving means more accidents, injuries and fatalities,” says Tonkin. “In order to avoid accidents, you basically have to drive as though everyone else on the road is a maniac out to get you,” he says.
While increasing premiums for speedsters and other traffic offenders would be a fair option, it could mean that those really reckless drivers will find it too expensive to have insurance, creating an even greater public liability. Brand Pretorius of Business OUTsurance says that the Gautrain could bring about a decrease in premiums if people swop their cars for a train ride, especially on the N1 between Pretoria and Johannesburg, which is at a virtual standstill every day.
While road rage is a new phenomenon in vehicle insurance, crime has been an issue for a long time, and continues on the increase. According to Steffen Gilbert of Santam, rising crime and replacement costs are a challenge for the industry. According to claims data, there has been a recent upsurge in the incidence of crimes such as car-jacking and, combined with vehicle price hikes, this leads to premium increases for policyholders.
Local car manufacturers and importers are reporting price hikes of 2-3%, mainly as a result of the weakening rand. As vehicles become more expensive to replace, insurance premiums are hiked.
“Many car owners are taking advantage of new and affordable microdot identification technology and tracking to prevent car theft and, in so doing, keeping their premiums down,” says Gilbert. “Although not all preventative measures will reduce monthly premiums, in the long-run they will keep premiums down by reducing claims.”
The problem is that even if you take all possible precautions, if a car is stolen and replaced by an insurer, premiums will go up, whether or not it was from policyholder negligence.
Surprisingly, people are not as safety conscious as one would expect. For example, it seems perfectly logical that just by locking car doors, the chances of cars being stolen are lowered. “One would think this is the obvious thing to do,” says Tonkin, “but, incredibly, in a police sweep of around 900 vehicles on the streets of a Johannesburg suburb a few years ago, officers reported over 150 unlocked cars, some even with their windows down.”
If your insurance premiums are starting to hurt the budget, it is worth shopping around. But a cheaper policy may simply mean that it does not have the same cover as your current policy, so make sure the quotes are comparable.
According to Tonkin, one way of reducing premiums is by choosing a higher excess payment. Obviously, this might mean dipping into your savings for an accident that wasn’t your fault.
Tonkin says vehicle insurance premiums can be reduced by 25% if combined with cover for other items with the same insurer.
Running costs
Two years ago an entry level Citi Golf cost in the region of R65Â 000. At a prime interest rate of 11%, that amounted to R1Â 400 a month in repayments.
Today the same car costs about R70Â 000 and with a prime interest rate of 12,5% that comes to R1Â 558 a month.
Two years ago a litre of petrol cost R5 — or R250 for an average-sized 50-litre tank.
If economists are right and we breach R7 a litre, that tank will cost R350.
Assuming that you fill up your tank twice a month, the total cost increase per month, including insurance, would be R418 or 17%.
Vehicle insurance for a 30-year-old driver was in the region of R300 a month. Today that monthly premium would come to R360. — Maya Fisher-French