Car insurance - premiums and depreciation

[riscbroker]

My insurance policy states, as I'm sure most do, that I should review the value of vehicles covered, on an annual basis. I have to assume that the value, amongst other criteria, influences the premium payable.

I have a car insured with a current (book) retail value of R43,200. This vehicle is however still valued (and has been since 2011) at R61,600 on my policy, my premiums presumably being calculated accordingly. Yes, I understand that it is my responsibility to review the value and inform whoever needs to be informed.

Since the insurance company bases payouts on values derived from the Mead and McGrouther/Transunion Data Digest, it seems a little disingenuous that the broker/underwriter/insurer should keep on collecting premiums based on a value that you will never realize in the event of loss. The insurer determines the payout in the event of loss, so patently has access to the current values. Why are these values then not adjusted annually by the insurer, apart from the obvious conclusion that this would impact premiums?

 

[Cool E]

Becareful when adjusting the insured amount on the vehicle.Check how much you owe the bank before adjusting. Insurance will pay-out the amount on the latest policy schedule document.This is to avoid shortfall. Most insurance get data from transunion on/before the 1 of each month.

 

[riscbroker]

Becareful when adjusting the insured amount on the vehicle.Check how much you owe the bank before adjusting. Insurance will pay-out the amount on the latest policy schedule document.This is to avoid shortfall. Most insurance get data from transunion on/before the 1 of each month.

I understand your premise but I don't think the insurance will pay out the value (R61,600) as currently reflected on the schedule. Transunion retail figure is R43,200. The vehicle is paid off so there is no shortfall to consider. My understanding is that insurers typically pay 'Market' value, which is determined as some figure between Trade and Retail value.

I've asked my broker for a payout figure, assuming total loss.

 

[supersunbird]

My insurance policy states, as I'm sure most do, that I should review the value of vehicles covered, on an annual basis. I have to assume that the value, amongst other criteria, influences the premium payable.

I have a car insured with a current (book) retail value of R43,200. This vehicle is however still valued (and has been since 2011) at R61,600 on my policy, my premiums presumably being calculated accordingly. Yes, I understand that it is my responsibility to review the value and inform whoever needs to be informed.

Since the insurance company bases payouts on values derived from the Mead and McGrouther/Transunion Data Digest, it seems a little disingenuous that the broker/underwriter/insurer should keep on collecting premiums based on a value that you will never realize in the event of loss. The insurer determines the payout in the event of loss, so patently has access to the current values. Why are these values then not adjusted annually by the insurer, apart from the obvious conclusion that this would impact premiums?

So have them correct it...

Anycase, I heard some regulations are coming out that will force the insurers to adjust it automatically once a year.

 

[riscbroker]

So have them correct it...

Anycase, I heard some regulations are coming out that will force the insurers to adjust it automatically once a year.

Yeah, I'm waiting for the response from the broker and then I'll have the value and premium adjusted.

My point is that the insurers blatantly ignore the vehicle depreciation in order to collect a higher premium. Multiply by a few million clients.......
Then try and claim for your loss against the value stated on your policy schedule and they'll be very quick to show you the bit that says you have to inform them of the change in value of your vehicle. A most convenient loophole.

 

[Hemi300c]

So have them correct it...

Anycase, I heard some regulations are coming out that will force the insurers to adjust it automatically once a year.

Yip it is part of the TCF Rules as laid down by the FSB Treat the Customer Fairly.

Another thing though. Your car is worth R40K but you have just had a major respray in Candy Apple Red, you have just put in a new engine and gearbox, how on earth is the broker/insurer supposed to know this. Hence the "blame" falls on the broker and client as the insurer will always base on the current market value.

Edit note:- Also remember that although the market value decreases the replacement cost for parts increases.

 

[ToxicBunny]

Also remember that the insurer won't pay out the "insured value" if its higher than the trade/retail value of the vehicle... so you are potentially paying for insurance that you will never receive if you have an accident.

 

[ProfA]

Also remember that the insurer won't pay out the "insured value" if its higher than the trade/retail value of the vehicle... so you are potentially paying for insurance that you will never receive if you have an accident.

+1. The fair ethical thing to do, is for insurance companies to adjust your premiums according to your car value on a monthly basis as that is how often it changes. Once a year is not enough. But insurance companies are anything by fair or ethical. Imagine the millions/billions they make every single month as car values depreciate and your insurance premium stays the same?

 

[riscbroker]

+1. The fair ethical thing to do, is for insurance companies to adjust your premiums according to your car value on a monthly basis as that is how often it changes. Once a year is not enough. But insurance companies are anything by fair or ethical. Imagine the millions/billions they make every single month as car values depreciate and your insurance premium stays the same?

My insurer (Santam) doesn't even revise the vehicle value on my policy on an annual basis, the last time they did was at my instigation in 2011. The amendment to retail value that has gone through now, again at my insistence, drops my premium by about 35%.

 

[hsmnel]

You need to check them up. My broker phoned me 3 weeks ago and said my premium is going up by R100 odd, told them sorry then I am moving as my cars have gone down in value. They phone me back 2 hours later and said my premium is going down by R500! Flippen bunsh of thieves these guys. Now paying R670 instead of R1190 for 2 mercs and household.

 

[riscbroker]

You need to check them up. My broker phoned me 3 weeks ago and said my premium is going up by R100 odd, told them sorry then I am moving as my cars have gone down in value. They phone me back 2 hours later and said my premium is going down by R500! Flippen bunsh of thieves these guys. Now paying R670 instead of R1190 for 2 mercs and household.

They're very good at applying increases for various reasons but seem incapable of calculating decreases unless prodded. I cannot understand how they can legally, not to mention ethically, go on deducting premiums against a value that they clearly know is inflated.

 

[ToxicBunny]

You need to check them up. My broker phoned me 3 weeks ago and said my premium is going up by R100 odd, told them sorry then I am moving as my cars have gone down in value. They phone me back 2 hours later and said my premium is going down by R500! Flippen bunsh of thieves these guys. Now paying R670 instead of R1190 for 2 mercs and household.

I would be leaving that broker. Mine does the yearly decrease for me, shops around for better quotes if they come with an increase etc etc

 

[SaiyanZ]

You need to check them up. My broker phoned me 3 weeks ago and said my premium is going up by R100 odd, told them sorry then I am moving as my cars have gone down in value. They phone me back 2 hours later and said my premium is going down by R500! Flippen bunsh of thieves these guys. Now paying R670 instead of R1190 for 2 mercs and household.

The irony is that whenever they make this call to let someone know that their premium is going up, they either lose the client or end up reducing the premium as in your case. I also went through the same a few years back. They said that they were going to increase the premium by R150. I told them I was going to move so they ended up reducing it by R200. A full R350 (R150+R200) lower than they wanted to charge me when they first called.

 

[breakpoint]

You need to check them up. My broker phoned me 3 weeks ago and said my premium is going up by R100 odd, told them sorry then I am moving as my cars have gone down in value. They phone me back 2 hours later and said my premium is going down by R500! Flippen bunsh of thieves these guys. Now paying R670 instead of R1190 for 2 mercs and household.

They really are freakin' leeches most of the time. No wonder most of the people I know who have comprehensive insurance coverage switch companies because of this reason. Sometimes you really have to be smarter than them.

 

[satanboy]

1) You have to inform them each year to reduce the value.
2) They cannot do this as you may have added fancy rims/soundsystem and such that increased the value again...etc

 

[riscbroker]

1) You have to inform them each year to reduce the value.
2) They cannot do this as you may have added fancy rims/soundsystem and such that increased the value again...etc

The insurer can adjust the value annually (preferably more frequently) as per Transunion.

The insured should report any modifications/accessories that he feels enhance the value of the vehicle.

That's my opinion.

 

[Die_Miek]

My premium went up by R100 on two vehicles last month, 2003 bmw 318 and 2009 bantam xl, I humbly requested a re quote seeing that both vehicles value has dropped.

 

[diabolus]

This is why there is even a "market" for getting "better quotes" between insurers. This is why outsurance can do their R400 thing,because the chances are 90% you will be at Insurer X, for at least a year, so you WILL get a better quote from any other insurer because they will use the latest value. It's pretty crappy market imho.

The only regulation they need to add is , is that insurers pay out what you insure your car for, regardless of what the depreciated value is. If they don't revise your insurance, they should pay out. This will automatically "encourage" them to revise these things.

 

[zippy]

I understand your premise but I don't think the insurance will pay out the value (R61,600) as currently reflected on the schedule. Transunion retail figure is R43,200. The vehicle is paid off so there is no shortfall to consider. My understanding is that insurers typically pay 'Market' value, which is determined as some figure between Trade and Retail value.

I've asked my broker for a payout figure, assuming total loss.

In the UK motor insurers have to give a months warning on the anniversary of the policy to give a chance to accept automatic renewal or switch to another insurer. During this process things like vehicle market value are recalculated and your renewal is based on the current value.

Just checking this morning and my new premium(my renewal date is late Aug) could drop from £535 to £284(these are annual figures) depending on the insurer.

If SA doesn't have a similar process, it's well worth diarising this at least every year to recheck your insurance, because you can't claw back your premiums if you paid based on a high value, but insurance would only ever pay out on a lower value.

 

[BTTB]

I have a broker who sends me a renewal notice each year in PDF format for me to peruse. Highlighted are all the changes. With 4 vehicles comprehensively insured and 2 properties, one for the building and contents and the other for just contents as the Bank does the building, the premiums can mount up.

Every second year or so I phone the motor car dealership for market values on the vehicles. All my vehicles are paid-up except the one new bakkie and here I have topped up with Stannic's Vehicle and Asset Finance division for any excess that may need to be paid between the sum assured and the amount owing to the bank. This can be helpful in the first year of financing a vehicle as you are merely paying the interest and this will cover any shortfalls.

The thing to watch out for are the Contents and Buildings, last year I noticed my insurance premium on the buildings or was it contents was getting quite high, so I checked the policy and it had an automatic escalating value attached to it and the insured amount had crept up quite considerably.

Other things to watch out for on your policy is tracking devices, unless you want one or have one installed. I got the broker to exclude tracking devices. Someone I know had their truck hijacked and stolen, the owner managed to jump out somewhere along the road, when they contacted the insurance company they were told they did not have a tracking device, it ended up they had to log back to the recording as they were not told they needed a tracking device and they managed to bypass that requirement. Best is to get it excluded completely.

My bookkeeper takes depreciation off my vehicles every year before taxation. Also you can claim VAT back on commercial vehicles except double cabs.