Despite the fact that cars depreciate in value, motor insurance premiums generally go up every year. But South Africa’s largest insurer, Santam, has pledged to adjust its systems to automatically take annual depreciation of vehicles into account of all the cars it insures. Santam did not commit to an exact date of its adjustments but it said that these would be made some time this year.
Santam said it made this change after it discovered that only 70% of cases saw a change in premium adjustments. “Initial feedback was a preference for advisers to review each client’s portfolio individually and notify us of vehicle value changes. This is a very straightforward procedure. We found, however, that adjustments were only implemented in 70% of cases, and decided to automate these this year,” said Donald Kau spokesperson for Santam.
Santam currently insures cars at their retail value using the Mead & McGrouther Auto Dealer’s Guide. While adjustments will be made to take depreciation into account customers may still have to do some legwork. Kau said that if customers believe their car is worth more or less than the retail value they are are welcome to send Santam a valuation certificate from a dealership.
Kau said the premiums will also be based on a number of other factors including the type of vehicle, its age, claims history, power-to-weight-ratio, location of the vehicle, age of the driver and the costs associated with repairs and parts. “It is unfair to assume that everyone is the same but that’s why you have brokers to help navigate in the process. The cost of car parts doesn’t for example depreciate annually and this is a significant factor in calculating the premium.”