Two people driving the same vehicle rarely pay exactly the same insurance premium. Sometimes the difference can be quite significant. There are a number of factors that contribute to your car premium. It’s not advisable to chase the lowest premium due to a number of hidden risks. What you need is an independent perspective on what your actual premium should be.
Do not get an insurance company nor its representative to quote for you nor the likes of Hippo. They can never be objective – always adding in profits, commissions and always trying to beat the competition in a rather stupendous race to the bottom.
At Virtual Adviser, we used the teachings of Prof Antonio and other experts to develop a model that estimates what your premium should be versus what you are paying. The equations are available here. But this is advanced actuarial science and not easily understood by all.
If you want us to calculate an objective estimate of your insurance premium, then click here to download a datasheet. Complete the datasheet and email it to me, [email protected]. I built the premium estimating model. You are free to ask questions about it.
Back to the matter at hand. We are seeking the risk rating factors which influence your premium the most. In machine learning these factors are referred to as features. Features can be extracted by processing a large database via sophisticated statistical methods. We reached out to Transunion to make this data (less the personal information) available to us. While we wait upon that, our own experience with insurance models indicate the following:
- Age.
- Age is the most significant risk rating factor.
- The younger you are (even if you were driving illegally since the age of 13), the higher your premium.
- You can get dad or mum to insure the vehicle but for as long as you are the primary driver, you will pay a higher premium.
- If you are dishonest about being the primary driver, your future claim will be repudiated!
- Driving experience.
- Age and driving experience are not necessarily correlated.
- Insurers estimate driving experience by the year you received your driving licence, the type of licence and the years you were insured as a primary driver.
- How you drive is becoming more important with modern insurers. Discovery uses telematics to measure your driving. The better you drive, the more you receive in monthly cash backs. Some clients hate being monitored. Those that do not mind are saving between 50 to a 100% on insurance premiums.
- Claims history.
- The more you claim, the higher your premium. You are seen as a high risk client.
- Even if the accident was not your fault and you submit a claim, it will be picked up as a claim against you. Insurer’s systems are not that bright, unfortunately.
- Credit score.
- Struggling to manage your cash flow? Credit report a mess? We can help you straighten that out. Contact us.
- In the interim, you will be seen as a high risk client – you are more likely to lapse your policy. Your premium will, ironically, be higher. Suggestion: clean out that financial mess.
- Location of residence.
- Western Cape drivers pay the lowest premiums, on average. Due to low claims in that region, the annual increases are also lower than inflation.
- Location of your residence is a bigger factor than having your car parked in a secure garage.
- Location of work.
- You live in Camps Bay but work in Nyanga and park your car there during the day. That’s a problem for your insurer. You will pay a higher premium.
- Gender.
- Females in general are more careful drivers and hence pay lower premiums.
- Insurance history.
- You could be driving for many years without car insurance. Then you decide to take one out. Due to lack of historic data to risk rate you, you will by default be deemed high risk. So better get insured as early as possible, and keep a clean record.
- Annual mileage.
- The more you drive, the more you are exposed to risks, the higher will your premium be.
- Insurers that allow you to pause your premium, effectively only pause this one factor of the 15 discussed. Hence, you will notice that their premiums are not that cheap relative to the competition.
- Marital status.
- Yes, married people do pay lower premiums, ceterus paribus.
- Type of vehicle.
- Vehicles that are most likely to be stolen or high-jacked are high risk and hence have higher premiums.
- Vehicles with high power to mass ratios have higher premiums
- Vehicles where spares need to be imported, scarce or expensive, have higher premiums
- Vehicles older than 20 years old are generally not insured in South Africa.
- Coverage and excesses.
- Is your car covered at retail value or market value?
- How large is your excess?
- Are you covered comprehensively, for fire and theft or third party claims only?
- Each of the above will impact your premium. You need to know the differences.
- Need help? Contact us.
- Vehicle usage.
- Are you using your vehicle mostly for business purposes? If so, then you need to declare this to your insurer. Cars, vans etc. used for business purposes attract a higher premium.
- Business insurance coverage is different from commercial insurance. Contact us to understand the differences.
- Insurance provider.
- Different insurers have varying risk appetites, hence you can pay twice more in premiums with some insurers compared to others. Cut out the guessing game, contact us.
- Tracking devices and other additional extras.
- Tracking devices do not reduce premiums significantly. Thieves can identify and remove them easily. But some insurers insist that you fit them – make sure that you oblige. This adds on to the insurance cost.
- Credit cover is useful. It covers the bank finance charges in the instant of a complete loss. Your car is paid off at retail value and the interest charges are paid to the company that financed your purchase.
- Write-off accelerators are wishy washy gimmicks in our our opinion. You do not really need them.
Customer service plays a major role when deciding which insurer to go with. Visit HelloPeter and other review sites to get an idea on user experience. Just as important is having a broker that you can depend on. We have the best brokers at Virtual Adviser that can be assigned to you. Contact us now.