[Jan 2015]  As we settle in to a brand new year, we are all too aware of the financial constraints that consumers are facing.  The average projected GDP until 2017 is only 3%, while consumers will need to fork out more on fuel price hikes, ever increasing water and electricity utility bills, high education costs and the rapidly increasing cost of living, especially on food stuffs. 

The weakening Rand, the number of recent local natural disasters and the increase in vehicle accidents are some of the reasons behind advised rate increases across the insurance industry; which is not exactly what most consumers were hoping to hear.

With the increased number of motor vehicles on the road, motorists are more likely to have an accident than in the past.  This is according to Mandy Barrett of insurance brokerage and risk advisors, Aon South Africa.  “Repair costs have increased significantly due to the depreciating Rand which impacts the cost of spare parts.  In addition, the sophistication in motor vehicle safety and increased motor vehicle technology, have resulted in a substantial increase in repair costs, even in minor collisions.” 

“While these realities may seem insurmountable, the secret to managing your insurance premium increases lies in risk managing your insurance portfolio,” advises Mandy. “A well-conceived insurance program is achieved by consulting with a professional broker who can assess your unique needs, risk profile and budget, and tailor-make an insurance offering that gives you peace of mind knowing that your hard earned assets are safeguarded in the event of a loss and, most importantly, that you’re paying the right price for the right amount of cover,” she explains.

One of the most important factors in managing premium levels is to improve risk levels through effective risk management and to take steps to prevent or minimise losses.  “The drive to save costs in the current environment is totally understandable. Insurance is one area where consumers often believe they can save, but the emphasis must however be on right-sizing your covers and seeking economies where they are to be found, and to avoid under-insuring,” says Mandy.

Insurers are moving towards incorporating individual risk rating methods such as telematics to monitor driving behaviour.  “A good risk profile in addition to a positive credit rating will stand you in good stead.  Your claims history also plays a big part when it comes to profiling your individual risk rating, as is what you claimed for and the circumstances surrounding each claim.  All these elements have an impact on your premium and can lead to increases beyond what you expected, if not managed correctly,” warns Mandy. 

In order to improve your individual risk rating, Aon offers the following guidance and tips when reviewing your insurance covers:

- Accept an increased excess on your policy that you can afford.  By doing this, you will obtain a premium discount.
- Accept a risk in its entirety i.e. not insuring an item which is relatively easy and readily replaceable such as your cell phone.
- Consolidate your homeowners, household contents and motor cover with one insurer.
- Make sure that you put security measures in place that insurers require for motor claims.
- Remember to tell your insurer about any security upgrades which could reduce your cover.
- Your property itself and its contents must be accurately insured for replacement cost to avoid the application of the ‘average’ formula.
- Analyse your portfolio professionally with the assistance of a broker at least once a year.
- Consider whether you can really afford to claim for causes that could have been avoided in the first place.

“You can benefit from sound risk management advice by speaking to a broker as it will greatly assist in reducing your incidence of losses, allowing you to benefit from a segmented rating where low risk clients enjoy lower premium levels than those with higher risks. While premium increases may be unavoidable in some instances, they can be managed,” concludes Mandy.