Car insurance premiums are on the rise
Increased costs faced by insurers means that the public end up paying more for their motor insurance
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Motor insurance is clearly one of the strongest branches in the South
African insurance industry. In fact, according to Centriq Insurance, in 2007,
this type of insurance made up 45% of the entire insurance market in the
country.
"Given that the general motor book ran badly again during 2008, this increase
will continue to rise," said the Client Manager at Centriq Insurance, Mark
Stone. "The trend of most motor underwriters continuing to reflect a loss will
necessitate a large general increase in premiums which may be as high as 25%."
A number of factors affect the motor insurance industry, including the
increased costs faced by insurers. Because these insurers are investing in more
cash instruments than ever before, their returns are also significantly lower,
leading to higher underwriting returns.
"There is the increased regulation of insurers resulting in increased
internal costs along with the fact that investment markets are very volatile and
risky," said Stone.
The rising cost of spare parts on new cars also contributed significantly to
the increase of insurance premiums.
As an example, Centriq Insurance showed that the increase for the cost of
paint on new cars was 19% in 2008, while paint labor rose 14%.
"Far more lower level vehicles are imported and the parts are therefore more
expensive," explained Mark Stone.
Other factors that made premiums rose where the state of the country's roads
as well as the general frame of the mind of the average driver. "Work pressures
are increasing and people are working longer hours, are more stressed and in a
greater hurry," he explained. "All this contributes to fatigue, reckless
driving, road rage - the list continues."
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