Increased Premiums Can Help You Save

At annual contract renewal time, short-term insurance policyholders usually have to pay increased premiums. Here are tips that you, as a policyholder, can negotiate a lower premium increase.

This is according to Christelle Fourie-Colman, Chief Executive Officer of MUA Insurance Acceptances. She says the short-term insurance market has become increasingly competitive over the past few years. Consumers are now spoilt for choice when it comes to providers. “As a result, renewal of a policy is a time when South Africans traditionally shop around. But it is important to understand the difference between inflationary increases on sums insured and actual premiums increases. That will avoid inadequate cover from a cheaper provider.”

Increased premiums and inflation

Inflationary increases on insurance premiums for home, its contents and all risks is not a premium increase, she explains. “The cover for these belongings is heavily influenced by the Consumer Price Index (CPI) and the reason Increased Premiumswhy insurers have to increase the sum insured (the value of the cover) is that these items will cost more to replace or repair a year later due to inflation.”

She says sum insured increases will typically give the policyholder more cover at the same rate.  “For example, the insurer will increase the policyholder’s building value by 6%. Then the monthly premium for building will also go up by 6%. They do this to ensure the policyholder has adequate cover. And so they will not have the average conditions when submitting a claim.”

Value of Items

The value of items such as jewellery are very important to adjust upwards. That is because fluctuations in cost of precious metals and stones affect the value of these belongings. The value of the Rand also impacts on the premiums, she adds.

Frequency, severity and type of claims

Insurance companies look at premium increases at contract renewal time in a certain way. They review the frequency, severity and type of claims experienced by the insured during the past year. They then adjust the premium or insurance rate upwards according to this data. “This can result in a higher premium for the same amount of cover. That is especially if the insured has claimed quite often during the period,” she says.

It is a good idea for policyholders to ask how their premium will change at renewal before submitting smaller claims. Often it is not worth claiming when considering the annual increase in premium as a result, she says. “In addition, insurers will more often than not also impose an inflationary increase on the actual rate to ensure premiums remain adequate to cover projected claims.”

Increased Premiums – Compounding also matters

Often an increase due to claims as well as an increase in property sum insured value can compound the effect of the increase, says Fourie-Colman. “This is why it can seem as if the increase is above inflation but in real terms it is not the case.”

Increased Premiums – Motor insurance

When it comes to motor insurance, policyholders often find this aspect of insurance often most confusing, as the market value of cars typically reduce but premiums tend to increase at renewal, she says. “Insurers do take the value of the vehicle into account when calculating a premium, but it is by no means the only factor which determines the premium. The majority of claims paid (as much as 80% of total claims paid) are for accidents and not write-offs or stolen vehicles. So one of the main factors in determining motor premiums is the actual cost of repairing the vehicle. The cost of parts and repair are heavily influenced by fluctuations in the Rand due to the fact that most motor parts are imported from foreign countries. The prices of the parts also constantly increase with inflation.”

As a result, we have to increase our car insurance premiums every year, regardless of whether the insured claimed or not, to cater for the increase in the cost of repairing accident damage, explains Fourie-Colman.

Increased Premiums – Always negotiate

She says most insurers will generally renegotiate renewal increases if a good client is not happy with the planned increase. “If the policyholder looks after their insurance claims record, they will be in a position of power to successfully negotiate increases down, without having to change insurers. However, policyholders must make sure they are not confusing sum insured increases where they get more cover with actual rate increases.

“Another word of caution, not all insurance policies are equal. Typically by paying less, the policyholder will have less cover and it is therefore vital to do a proper comparison of cover. Check excesses, driver restrictions, policy cover and limits of extensions. When in doubt, it is always a good idea to ask a broker for help,” states Fourie-Colman.

Increased Premiums – Tips for Consumers

Finally, Fourie-Colman provides the below list of tips for consumers to evaluate whether they are paying an optimal insurance premium:

  • Review your policy and shop around when it comes to renewal time;
  • Be sure to compare apples with apples;
  • Only consider dealing with insurance providers who are prepared to guarantee your insurance premium for the annual term, regardless of claims filed;
  • Consumers should not claim for every single little loss as most insurers also consider the frequency of claims that the client submit, even though it is for small amounts;
  • Do revalue and adjust the value of jewellery in the insurance policy at times when the rand is under pressure. This will ensure that the increased replacement value is adequately catered for;
  • Do not move insurance providers for a small saving in premium. Rather ask your current insurer to reconsider and adjust your premium if needs be.  A long standing relationship with your insurance company can come in very handy when experiencing challenging times;
  • It is always worthwhile to deal with a broker who could add weight to negotiating premiums.


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All info was correct at time of publishing