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Help! A young person’s experience of looking for car insurance

Why car insurance premiums for young people are so high and how you can negotiate a better price.

On Tuesday morning, I found myself on the phone with an insurance company trying to get a quotation for car insurance. The conversation started out as hopeful and ended in tears.

Let me explain why.

I am a 24-year-old woman who lives in an access-controlled apartment block in a small suburb in Johannesburg. I have had my licence for two years and am in the process of finally getting my own vehicle. My eyes are set on a small 2019 demo model with a 1.2-litre engine and less than 10 000 km on the clock. What could go wrong?

Well, after getting off the phone with an agent from OUTsurance, the only thing I could say to the other person in the room was: “I am never getting a car.”

“What’s wrong?” they asked.

“I’m going to have to pay an insurance premium of R3 800,” I wailed.

On further negotiation with the insurer, I was told that my premium could be brought down to R2 800 for the car alone. The initial amount included household contents cover of R227 and this was stripped out in the second quotation plus I had received an additional discount because insurers are always trying to entice you to stay with them. But R2 800 was still too high. 

I had been warned about high premiums because of my age and the short time in which I have been driving, but I didn’t expect them to make my eyes water.

Read: Is Uber cheaper than owning a car?

I had to go somewhere else, so I spent my morning calling different insurers trying to get the best deal for someone of my profile.

A call to Santam with the exact same information for comprehensive insurance covering accidents, theft, emergency assistance, third-party liability and so on plus the option of a complimentary car when my car is in for repairs came in at around R1 800. I would also pay a basic excess of R4 500 if I claimed.

Things are looking up and I am back in the game.

“Try King Price!” the other party encourages me after I excitedly inform them that not all is lost and I might be able to afford my little vehicle. “The more you call the lower it gets.”

He is not wrong. The King Price agent sends me a quote and the email reads: “Congratulations Tebogo, it’s with great pleasure that the King and I present this quote to you.”

I can’t help but think ‘Yes, it is a pleasure and congratulations are in order’.

I had just brought my quote down to R1 700.

But before I could celebrate, I learn that I will have to pay basic excess of R15 000 if I ever put in a claim. That is definitely not something I can afford.

Similarly, a lower offer from MiWay of about R1 500 comes with an excess price tag of R12 000.

“It has to do with the experience of the driver, and young drivers are inexperienced and the insurance companies’ rating structures would typically load the insurance premium for [these] drivers because they anticipate they will have more claims,” says Christelle Colman, MD of Old Mutual Insure’s Elite Risk Acceptances.

She adds that many insurers also factor in gender because global actuarial statistics have shown that young male drivers are at a greater risk of having more severe accidents than their female counterparts and older men.

Read: The most expensive items to insure

“The good news is that as you get older you pay less and less,” says Colman. “You get to 55 and you will pay less than you have paid in your entire life.”

If you have around five years’ experience the loading is likely to even out and when you are 30, the age-related loading in the car insurance premium falls away. Colman says not all car insurers use the same approach and some may ask for the number of years a potential client has been driving or their age because in South Africa many people get their licences when they are much older.

How to decrease your premium

“Something else that is really important is if you have a good insurance track record. If you are young and have not submitted claims, you also pay less – you can manage your premium by not being reckless,” says Colman. 

Increasing your excess is another way to decrease monthly premiums.

Colman says it is important to shop around for lower premiums, or to get a broker who will use their experience to negotiate better rates on your behalf.

It is also crucial to not just go on bottom-line premiums because sometimes low premiums mean less cover. Colman says motorists need to take their time reading their insurance quotes to understand what they are paying for and what is excluded. Unfortunately many only find out about certain exclusions when they have a big problem, and by then it’s too late.

In the end consumers need to be honest with their insurers when taking out cover as this could mean the difference between a successful claim and no claim at all.

As for me, I am calling a broker. A single call to an insurance company for a quote can take up to 30 minutes and, if I am to be honest, I need assistance.

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Young drivers have always been a higher risk. But SA has a unique problem: half of all new licences are fraudulent (bought).

My company presents defensive driver training and our trainers are seeing at least one driver a day each who could not possibly have passed a government driving test. We’re not talking stereotypical ‘bad driving’ here, we’re talking unable to competently change gears or steer; ie. at the level of a novice driver after two or three hours of instruction. Most of these drivers are under 35 years old.

Insurers are picking up the tab for this, and so are companies – one company we recently quoted has an annual crash rate of 371% of fleet. Which means each vehicle is crashing approximately four times a year.

The fatality rate on our roads has tripled since 1998 and can be directly linked to the collapse of the licensing system, which is itself just another manifestation of the wholesale corruption which has flourished under the ANC.

Fascinating Rob

Can you quote your source for 50% fraudulent driver’s license statement?

My experience with insurance is that they use these industry practice answers for every thing.
I was told the car’s colour and my gender added to my premium. So I said ok, seeing that I was about to buy the car, I will go buy a white one, and my wife will be the primary driver. New quote, no change, so that was bull.

Then I was explained that the car I fancied was expensive to repair. When I presented the latest Kinsey Report showing the exact opposite, I could get no explanation how they got to their conclusion.

I suspect the age thing is also over used. I think it’s more of a, because we can and everybody does, thing.

And then finally, the consistent forced over insurance by using the M&M values when no one gets that.

Hi Danie, sure. The insurance industry estimate was 20% – 25% as far back as 1990, but definitive data comes from the SIU which has done several investigations. Their findings have been that about half of the licences they investigate are fraudulent (source documentation missing or fraudulent, or validity of the driving test not supported by metadata).

Journalists have occasionally gone undercover to see how easy it is to buy a licence. In Ethekwini a couple of years ago, 8 of 10 driving schools surveyed were prepared to help the journo buy a licence. Does that mean 50% of their clients buy their licences? Who can tell. But it’s a hell of a coincidence.

Licence fraud is the single biggest contributor to the current road carnage. No other single factor (or group of factors, for that matter) can account for the spike in fatality rates since 1998.

If so, I wonder why Insurance companies do not incentivise “re-testing” (by them) to lower your premium. We have parallel everything else in this country.

hereshoping
I find OUTsurance so expensive that its an absolute nonsence advert of theirs on TV. I use a broker who gets me a better quote than i can find and if anything should go wrong they are just up the road.

I also find outsurance premiums to be ridiculously high! I always wonder how people much youngerthan myself(I’m 51years old female with more than 25years experience in driving,although the date of 1st issue on the card licence is 2003,The 1st official licence issued on the green RSA ID book was in 1992!) get much cheaper quotations/premiums,according to what I see on their adverts!!
I think being a black female driver immediately puts me at a disadvantage and living in the township(even if I can have all the necessary security features like high walls,security locked up,gate and garage, CCTV cameras) doesn’t make it better either.This I find extremely unfair because we all experience similar crime challenges whether we’re in the suburbs or not.I’m busy shopping a round for insurance for a small 2015 entry level car and the quotations I’m getting are ridiculously high across the board with Outsurance being the worst at around R2130.00 per month with excess of about R4600(excludes a special broken window excess of R1290).It’s just crazy! I don’t even want to talk about the bigger German sedan also 2015 model! The driving experience I have counts for absolutely nothing!!

With yourself being in the young high-accident risk group, WHY NOT put your (almost) new car aspirations aside for say 5 or so years, and instead buy (an older, but much cheaper) used car?

The advantages are (i) lower insurance based on lower car market value (ii) allow a few years’ time to build up a positive no-claim track record, (iii) spending less on a car now, will allow you to save cash for bigger deposit on new/newer car (you really want) at say close to 30-age. Win-win.

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