Many people assume that the biggest risk to their vehicle is theft or a complete write-off in an accident and that accordingly, the actual value of their vehicle is the major determinant of the insurance premium price…
But this is not the case, says Tania Joffe, head of Auto & General Brokers;
A relatively low percentage of accident-damaged vehicles are actually written off and, in fact, the majority of vehicles involved in accidents are repaired and put back on the road.
The costs associated with repairing vehicles plays a far more significant role in determining premium price, and most of the insurance premium goes towards covering the vehicle against accident damage. Fixing accident-damaged, modern vehicles is a very costly affair. This cost will be substantially more this year than the same time last year, due to our currency depreciation, for example.
What’s more, many of the vehicles on our roads are imported, meaning that spare replacement parts have to be imported too. The costs of these spare parts have increased due to the escalating costs of petrol and transport, for example.
The market value of your car may be lower, but because the premium is providing cover against damage to the vehicle more than anything else, premiums have to increase in line with repair inflation to viably cover the risk.