Jon-Jon Smit, Executive Head: Sales and Marketing, CIB
The past two years have taught us a great deal as an industry. Some have emerged from the worst of the Covid-19 pandemic battered and bruised, while others have fared better.
During the tightest of lockdowns, many consumers cut back on their motor insurance, with some motorists cancelling their policies entirely. Most insurers lowered rates, leading to premium relief models, thanks to the lower risk presented by lower traffic volumes and reduced usage resulting in fewer motor accidents.
Post lockdown we have, predictably, seen a rise in claims due to the return-to-normal of traffic volumes, as more people go back to working in the office. Even the statistics released by the Department of Transport on the road death toll during the 2021/22 festive season are troubling. Close to 1 700 people died in motor vehicle accidents, an increase of 14% on the year before. Over 1 500 people were arrested for driving under the influence of alcohol, while 605 were arrested for driving at speeds topping 190 km/h. These statistics are concerning, both in terms of their impact on society and the effect they have on motor insurance ratings and premiums. The basic deduction, therefore, is that, in the main, things are back to normal.
In addition, the industry is under pressure from the rising cost and availability of spare parts, which pushes up the average cost of claims – a trend that looks set to continue well into the future.
Then there are the shifting weather patterns which have also played a significant part in driving up motor claims. Forces such as high winds, intense rain and extreme temperatures – especially extreme cold that leads to slippery roads – lead to adverse driving conditions and an increase in traffic accidents. The latest floods in Gauteng is a perfect example of the new extremes we are dealing with.
Risk Management Focus -Based on these various trends, the role of the broker in the shift to a risk management focus will definitely become more important as we tackle these pressures into the future.
These risk management conversations could be seen during the COVID period when reduced travelling affected exposure and required a re-look at variable risk patterns. Furthermore, although many business owners are calling for their staff to return to the office environment, there are still a lot of consumers working from home, which attracts a very different risk profile and pricing. Where they used to use their personal vehicles for x, they are now using them for x, y and z, which has an effect on the premiums being charged.
The important thing to remember is that there are different variables in terms of motor risk. As an industry we need to understand the risk of the consumer, help them to manage the risks better and ultimately tailor-make an insurance solution that is suitable to the client’s specific situation and /or needs.
This clearly shows that there is no one-size-fits-all approach when it comes to motor insurance. Really knowing and understanding each client’s circumstances and particular risk profile remains key.
As we say at CIB, “Great insurance shouldn’t be about the cover you get. It should be about the cover you need.”