Most SA insurers gave their clients discounts on their car premiums during the first months of hard lockdown, but claims statistics show the industry is continuing to benefit from significantly reduced claims as work-from-home has become the new normal for many.
If you are paying the same premium for your car as you were this time last year, yet you’re now working from home for the foreseeable future and mainly shopping online — hence your mileage and therefore your risk has drastically reduced — you should need to have a word with your insurer about reducing your premium.
Trust me, they can afford it — the industry has benefited very nicely when it comes to motor policies since Covid-19 turned the world on its head.
The industry’s motor claims ratio for January to September 2020 was an average 51%, dramatically lower than the 63% for the same period in 2019.
This is revealed by claims statistics submitted by the insurers to the Financial Services Conduct Authority.
The claims ratio is the percentage of premium income which insurers pay out in claims.
From January to September 2020, insurers collected a total of R30.435bn in premiums, and paid out about half of that (51%) in claims: R15.462bn.
While total premiums paid in the hard lockdown months of the second quarter — April, May and June — were just R42m less than in the first quarter of 2020 (R10.111bn compared to R10.153bn), the claims ratio plummeted from 58% to 41%.
Meanwhile, that much reduced motor claims ratio is proving to be very beneficial for insurers’ balance sheets.
Insurers paid R5.886bn in claims in the first four months of 2020 and R4.117bn in claims in the second quarter. That means the insurers received R42m less in premiums (Q2 vs Q1) but paid out a whopping R1.7bn less in claims in the months when the roads were the quietest.
Interestingly, by the third quarter — July, August and September — total motor premium income increased to a sum even higher than the pre-lockdown first quarter — R10.171bn — while the claims ratio, at 54%, was 4% less than in Q1. Claims versus premiums information for the last quarter of 2020 is not yet available, the FSCA told Sunday Times Daily.
Questioned as to why current car insurance premiums do not appear to reflect the significant impact which the dramatic shift to working from home has had — one which is predicted to continue — the SA Insurance Association (SAIA) said most of its motor insurance members had introduced or were busy formulating options that took into account the Work From Home status of many.
“In terms of the claims ratio, there has clearly been a marked reduction because of the Covid-19 pandemic lockdown restrictions, which also impacted travel, but it is too early to say whether this is a sustainable phenomenon,” SAIA said.
“Not only was less mileage being done for much of 2020, but SA also experienced several restrictions, including alcohol bans and curfews which contributed to the reduction in the claims ratio.
“Should insurers come to the view that the claims ratio will remain at low levels for the foreseeable future, the nature of competition in the sector suggests premium reductions will flow through the system over the next year or so.”
Meanwhile, that much reduced motor claims ratio is proving to be very beneficial for insurers’ balance sheets.
Yet when Magda Snyman of Boksburg needed a rental car for longer than the 30 days stipulated in her policy while her car was being repaired, due to a Covid-19 related delay in sourcing parts from overseas, she was given a hard no.
Snyman’s six-week-old Hyundai Venue was extensively damaged in a four-car freeway smash in late November and has yet to be repaired, due to what Hyundai terms “global supply chain disruption caused by the Covid-19 pandemic”.
The premium Snyman pays for her Outsurance motor cover includes a month’s car rental, but when that expired just before new year, and she asked for an extension because of the parts delay, the insurer refused to extend that, despite the circumstances.
After Sunday Times Daily took up her case, the insurer agreed to pay for another month’s car rental. “While as a general rule, we do not extend car hire due to the 30-day maximum limit per claim, we do make exceptions based on factors such as the expected time of arrival of the part and the reason for the delay,” Outsurance said.
“In this matter we have a clear indication that Covid-19 is the reason for the delay, and as such we should allow for an extension of the car hire.”
Tony van Niekerk, editor of insurance industry magazine Cover, said general premium adjustments as the industry’s pandemic response would not be made in the short term, but insurers should find ways of using their claims ratio gain to delight their policyholders in other ways.
“Extending car hire periods, where warranted, is an example of that,” he said. “But the big corporates — and not just insurers — are usually too rigid in their processes to do it.
Well, the opposite of rigidity is what corporates ought to be applying now, if you ask me.
If your risk has plummeted since last March, your premium should reflect that. If it doesn’t, make that call to your insurer, and if they’re not willing to budge, I suggest you do some like-for-like cover comparisons and then make the appropriate move.
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