Myth Busted: Car Insurance Premiums

Car Insurance premiums: Myth Busted

This is a question I get asked often at review stage. “Ryan, my car has depreciated, why is my insurance premium still the same?” asks my client. My answer is always the same.

Let’s say in 2011 you purchased a Toyota Fortuner for R406 300, and you were being charged a premium of R950 a month to insure it.

In 2018 the retail value of the same vehicle is now R276 400 (depreciated by R129 900), however the premium is still in the R900 region.

“Why on earth is this happening, what is going on, am I being ripped off?”

To understand the why, we need to take a closer look at the factors an insurer considers when applying a rate to your vehicle:

  • Age of driver
  • Type of driver’s license
  • Driver’s insurance history
  • Value of vehicle
  • Cost of reimbursement due to theft, hijack or write off
  • Theft Risk of vehicle
  • Ant-Theft devices in the vehicle
  • Usage of the vehicle (private vs. business)
  • Area of usage
  • Cost of repair at claim stage for accident
  • Availability of parts from manufacturer

For this article, I am only going to focus of the cost of repair at accident stage:

Claim Scenario:

If you mistakenly opened your door onto a pillar at a shopping mall, and dented the door, we would need to claim and get the vehicle repaired at a panel beater. Let’s compare the costs between a 2011 repair, and a 2018 repair.

The cost of this claim can be broken up into several parts:

  • Panel Beater Costs
  • Assessor Costs
  • Car Hire Costs
2011 Toyota Fortuner 3.0D-4D A/T R/B 2010 Values 2018 Values
Vehicle Value R406 300 R276 400
Panel Beater Cost to Repair dented door R7 500 R13 000
Assessors Cost R1 200 R2 250
Vehicle Hire for 20 days R1 800 R3 000
Total Cost of Claim R10 500 R18 250

Astoundingly the claim in 2018 is 74% more expensive, even though the vehicle has lost 48% of its’ value.

The panel beaters costs are affected by:

  • Rising costs in parts and consumables
  • Unsteady exchange rates
  • Labour cost of staff
  • Operational costs

One can see from this example above how many factors go into pricing your vehicle insurance; and how even though your vehicle is depreciating in value, it is becoming more and more expensive to repair it with every passing month.

If you are concerned that you’re paying too much for your car insurance, contact us or click here to obtain a quote.



ryan walsh