There is a definite need for cheap car insurance. There are an estimated 10 million vehicles on SA's roads but only about 35% are insured. Poor maintenance of South Africa’s road infrastructure, a rapidly depreciating currency and general impunity to road and traffic laws has created the perfect storm for consumers and car insurance providers alike. But despite the gloomy outlook, there is still hope with many lesser known affordable car insurance options readily available.
The South African Rand has depreciated by more than 60% in the last three to four years. Consequently, the price of imported vehicle parts has sky rocketed, steeply pushing up the cost of vehicle repairs and the average car insurance claim amount with it. In addition, the price of vehicle recovery and salvage has risen dramatically too with up to 40% of the average R20 000 claim going to the cost of getting the vehicle from the site of the accident to the repairer.
It’s no wonder then that comprehensive car insurance companies have been forced to increase their premiums materially each year just to keep their motor portfolios out of the red. Many are now also shifting their practices away from a replacement of parts approach to a “repair what can be repaired” approach.
This is not to mention the regular increases in car insurance excess amounts, meaning that car insurers are expecting their clients to carry an ever increasing financial burden from their own private funds.
The poor state of South Africa’s roads has further aggravated the car insurance crisis with annual road deaths approaching nearly 20,000 people each year. Enormous potholes, faded road marking and signs, and faulty or broken intersection robots generate an enormous amount of otherwise avoidable car insurance claims.
Ineffectual traffic policing and general impunity to South Africa’s road traffic laws are another major contributor to otherwise avoidable car insurance claims. If only South African consumers were able to access innovative car insurance products that were affordable yet offered meaningful protection.
The fact that nearly 7 in 10 vehicle owners do not have car insurance is not that surprising. When one carefully considers the colossal cost of vehicle ownership and the princely price of comprehensive car insurance, the answer becomes abundantly clear.
Most of South Africa’s 10 million vehicles are financed by one of the major banks. Therefore, each vehicle owner needs to make a monthly debt repayment on their vehicle unless they wish to have their vehicle repossessed. This repayment often represents a significant percentage of the average South African’s income.
Fuel prices have been steadily rising with the State not passing on the savings from decreasing international crude oil prices to SA consumers. Instead, the fuel levy has been increased to fill this void with bigger taxes.
Vehicle servicing costs can also be high with many motorists not being able to regularly maintain the recommended manufacturer service cycles. This accounts for a large portion of car insurance claims that relate to mechanical or electrical failures.
And then there is the issue of insurance. After finance repayments, fuel and maintenance costs, vehicle owners still need to find room in their strained budgets for car insurance. To make matters worse, comprehensive car insurers apply what is called risk profiling.
What this means is that affluent South Africans living in safer areas with lock-up garages, who drive expensive cars with leading security measures get the best deal on car insurance. Ordinary South Africans living in the real South Africa, driving ordinary cars pay proportionately more for their insurance. It’s understandable then how short term insurance is almost always the first thing to be dropped during a tough month.
Are you you looking for affordable car insurance for your car? Car insurance companies need to reinvent the wheel and come up with some new cheap car insurance options for real people with real financial constraints. The old suite of products is just not meeting the current needs.
Whilst the uptake has been slow, it seems that some car insurance businesses have already responded to South Africa’s car insurance crisis with sustainable solutions.
Imagine affordable car insurance that cost as little as half of what comprehensive car insurance costs. Imagine low-cost car insurance that guaranteed you a fixed premium for the life of the policy with no annual increases and no excess to pay when claiming.
Imagine cheap car insurance with no risk profiling and a one size-fits-all approach to policy pricing. Imagine affordable car insurance that could be masterfully flexed according to your needs and budget. Imagine. Sounds almost too good to be true. Strangely enough, all of these things are actually available right now.
Organisations like Prime Meridian Direct have developed innovative, cheap car insurance solutions that can fit just about any budget. With some options starting from as little as R149 a month and a guarantee of “Fixed Premiums for Life”, it certainly seems like they’re switched on to the problem. Perhaps there is hope yet for South Africa’s car insurance crisis.
Car insurance Policies mentioned are distributed by Prime Meridian Direct (Pty) Ltd, an authorised Financial Services provider. FSP 41040 and policy benefits are underwritten by RMB Structured Insurance Limited. FSP 1027.