Two South Africans can insure the same make and model of car and still end up paying very different monthly premiums, sometimes by hundreds of rands. That’s because insurers don’t only quote based on the vehicle itself. They also consider the risk profile of the driver and how the car is used. In addition, the excess a customer selects can push the premium up or down.
“People often assume car insurance is priced mainly on the car,” says Ernest North, co-founder of the car insurance provider, Naked. “But in reality, insurers are trying to estimate two things: how likely you are to claim, and how expensive that claim is likely to be. That is why your insurance quote and your neighbour’s can differ, even if you drive the exact same car.”
Here are some of the biggest reasons why car insurance premiums can differ between drivers, even when they insure the same car.
1) The driver’s profile and how the car is used affect the risk and the premium
Even with the same car, insurers will look closely at both the driver’s profile and how the car is used to estimate risk. This can include factors such as age and driving experience, claims history, how long the person has been insured, where the car is used and parked, and credit record, which is often used as a risk signal.
Different insurance providers also weigh these factors differently, which is one reason quotes can vary from one insurer to another.
“Insurers don’t price a Toyota Corolla in isolation,” says North. “They price a Toyota Corolla driven by you, in your context.”
For example, someone who has had a licence for more than 10 years, drives shorter distances, has a clean claims history, and parks behind secure gates is likely to pay less than someone who has only been driving for a couple of years, has claimed recently, and parks on the street in a higher-risk area.
2) Your excess can lower (or increase) the premium
The excess, which is the amount you contribute when you claim, has a direct effect on your premium. A higher excess usually means a lower monthly premium and a lower excess means higher monthly premium.
“The key is to choose an excess you can realistically afford,” says North. “A lower premium can look attractive, but not if it leaves you stuck when you actually need to claim.”
He adds that it is also important to understand how excess works so you can compare like for like. “Some policies include additional excesses in certain scenarios, for example if the driver is under 25, if you are driving at night, or if you claim within the first three months of a policy,” he says. “Those add-ons can stack up and significantly increase what you pay when something goes wrong.”
“With Naked, customers pay the single excess they selected in the app, so they know upfront what they would need to pay if they are in an accident,” says North.
Compare quotes carefully
Two quotes can look similar at first glance, but the details can differ in important ways. When comparing car insurance quotes, drivers should check that they are comparing the same type of cover, with similar excess and the same extras. Optional extras such as car hire or credit shortfall cover can also increase the monthly premium.
“People often compare prices without comparing what’s included,” says North. “The right question isn’t only ‘what does it cost?’ It’s ‘what am I covered for, and what would I pay if something goes wrong?’”
The best way to check whether you are paying too much is to compare like-for-like quotes across insurers and make sure the cover, benefits and excesses are genuinely comparable.
Many online car insurance calculators only provide an estimate of your premium. You may still have to contact a call centre or complete additional steps to get a final quote. Naked Insurance, however, allows customers to get a final car insurance quote online in minutes.