More to vehicle insurance than what you drive and where you live

Netstar

Does where you live make a difference when it comes to the price of your vehicle insurance? Of course it does, but soon there will be much more to it than mere location.

Carjackings increased 13% in 2021 and truck hijackings went up 45%. According to the same data set by the South African Police Service (SAPS), contact crime increased 60% compared to the same period last year.

It’s no secret that where you live impacts your exposure to crime. Johannesburg residents are more likely to be the victims of hijackings than those living in Cape Town, for example. But insurers know all too well criminals’ penchant for certain types of vehicles – which affects how much you pay for insurance on these vehicles.

Telematics data will play an increasingly integral part in mitigating these risks. Using data from vehicle tracking technology, provided by tracking and recovery companies, insurers can adapt and tailor premiums according to a client’s driving behaviour. This is aside from the obvious vehicle tracking and recovery services that kick into gear if criminals make off with your vehicle.

Geography (where you live) is an important consideration when it comes to pricing vehicle insurance premiums and, ultimately, will be a motivating factor when deciding whether to have a tracker installed in a vehicle.

“The bottom line is that your risk levels affect your premium. It’s critical for clients to be 100% honest upfront about their particular risks so that they can be covered for their personal circumstances,” explains Wynand van Vuuren, client experience partner at King Price Insurance.

Brokers must guide their clients when it comes to vehicle insurance and telematics options available to them, says Van Vuuren. “A broker will make it their business to determine exactly which types of risks they’re dealing with,” he says. Every detail should be accounted for: from the make and model of the car, the age of the driver, how and where the vehicle is used, where it is parked, and which security measures are in place, Van Vuuren explains. “Even the colour of the vehicle could make a difference when building a risk profile,” he says. This information will form the framework for negotiating a rate with an insurer that works for all parties.

High risk

Just by knowing your location, insurers can ascertain the level of risk in an area by looking at the number of vehicles stolen, cases of vandalism, and the number of claims, including fraudulent claims, among other factors, says Peter Olyott, CEO of Indwe Risk Services. Insurers even check weather patterns for hail and other weather-related risks. “All of this helps them discern the risks associated with insuring you and your vehicle in that geographical area,” he says.

According to 2019 data released by the South African Cities Network (SACN), the following areas, in order of high to low, are high-risk for hijacking in South Africa.

• Johannesburg
• eThekwini
• Ekurhuleni
• Nelson Mandela Bay
• Cape Town
• Tshwane
• Msunduzi
• Mangaung
• Buffalo City

According to an article published in BusinessTech, which used SAPS data for their conclusions, most carjackings over Q1 2021/2022 was reported in Gauteng (2,704), followed by KZN (820) and the Western Cape (589).

Olyott says the make of a vehicle can lead to higher premiums but not just because of its popularity with criminals. If an insurer’s data notes that drivers who own a specific vehicle are more likely to be involved in accidents or have high claim histories, it can also result in higher premiums. Conversely, cars with extra safety features such as collision warning systems will result in lower insurance premiums. Additional factors such as vehicle purchase price, theft rate, cost of repairs, accident rate, and its safety test history, all determine the insurance rate.

Telematics and data

“Information collected from connected vehicles and telematics sensors provides rich data to insurers, which can be useful for a variety of reasons,” says Tarina Vlok, General Manager at Elite Risk Acceptances, a subsidiary of Old Mutual Insure. “This includes predictive and more accurate premiums; improved driving behaviour; reduction, even prevention, of avoidable accidents; and an improved claims and assistance services process,”

Justus van Pletzen, Insurance Markets Consultant for vehicle tracking and telematics provider, Netstar, a subsidiary of Altron, explains that a service provider such as Netstar provides insights to its partners using its huge trove of aggregate data. This data highlights everyday driving patterns, along with criminal behaviour, such as where vehicles are more likely to be stolen.

In today’s world of big data, this information is extremely valuable in terms of understanding risk but also in preventing these risk events. It’s the holy grail of insurance, says Van Pletzen, “where you’re not just dealing with the risk side of things but also the prevention of risk.”

This data can also benefit individuals by giving them access to more dynamic insurance models, which rewards policyholders who drive safely and park their vehicles in a garage at night.

Vehicle underwriting and rating will increasingly become data-enriched and be based on aggregated data such as distance travelled, the time of use, hard braking, and quick acceleration, explains Vlok. “This information feeds directly into premiums and the core insurance principle of paying in accordance with the risk introduced to the pool,” she says.

Traditional premium rating methodologies consider various factors based on the information given by the client at the commencement of the contract,” she says, and this includes the area where a vehicle is used and kept, the make and model of vehicle, and age of the regular driver. Telematics enables insurers to ensure that the supplied information is correct, that the driver does indeed park the car where they indicated in their contract. But telematics devices also provide a whole subset of information which enables insurers to further fine tune premiums.

Key takeaways for brokers

Vlok shares the following advice for brokers:

• The world is moving to a user-based insurance (UBI) solution; discuss the options available to your clients based on their insurance provider.
• Embrace new technology and consider installation of telematics devices. It may lead to lower premiums or premium refunds on your client’s car insurance.
• Remind your client to read their contract carefully to establish if a form of telemetry is required on their vehicle. If, for example, the insurer requires that a tracking device is installed and your client does not, they may not pay a claim for theft or hijacking.
• Recommend your client to install integrated telematics systems in vehicles driven by their children. Not only will your client be able to ensure their child remains safe with the geo-tracking capability, they can also ensure that the children drive safely and save money on insurance if they do.
• If your client has a telematics device, they should try and avoid braking or accelerating suddenly, and driving at night.
• If your client works from home and rarely uses their vehicle, they should speak to you about pricing solutions that will better suit their budget.

When and where you drive your vehicle, along with the make of the vehicle, decide the level of insurance and price of insurance, but the increased use of telematics in everyday insurance levels the field in rewarding drivers that make use of these technologies to improve safety and proactively reduce risk.