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How to negotiate lower insurance premiums

By Isabelle Coetzee

Paying monthly insurance premiums can feel like a grudge purchase because you don’t see the benefits unless you find yourself in a sticky situation.

But would it seem less so if you could pay lower premiums? We found out what you can do to make yourself appear more favourable to your insurer and then, with this in mind, negotiate lower premiums.

Tip: If you don’t have life cover yet, click here to find out whether it’s the right product for you.

Do what you can from your side

According to Peter Olyott, CEO of Indwe Risk Services, you should not cancel or reduce your cover without due consideration.

“There are many stories of cover being cancelled and the client suffering a devastating loss with no recourse to lodging a claim. For individuals and SME’s the latter can be difficult to recover from,” says Olyott.

He believes that it’s imperative that the insurer understands the risks they are expected to cover. Therefore, you should provide accurate underwriting or risk information to the insurer, including all efforts taken to mitigate these risks.

“Make sure all valuations are up to date and that motor vehicle values are adjusted for depreciation. Where replacement goods are sourced from overseas, make sure you consider the impact of currency fluctuation,” says Olyott.

READ MORE: What’s the deal with underwriting?

Besides this, he also recommends:

  • Making sure that all your security systems are in working order and tested frequently.
  • Considering voluntary deductibles - this of course implies that a lower premium may be charged. However, at the time of a loss or claim the higher excess or deductible will be carried by the client.
  • Considering prudent risk management measures which will show a willingness to mitigate risk. Premium savings can be used to improve risk management initiatives.

Should you negotiate through a broker, or independently?

According to Olyott, communication is key, and the cost of your insurance premiums should be addressed timeously.  

He recommends that you contact your broker or, if you don’t have a broker, consider appointing one who will assist you in negotiating with your insurance provider. In particular, he believes a broker would be able to advise you of the impact and consequences of negotiating.

“However, if you prefer to conduct your own negotiation, make sure you understand the impact of the offer as well as the impact in the event of a claim,” says Olyott.

“Shopping around for a better price is always an option, but I find that loyalty goes a long way in convincing the insurer to reduce premiums, especially during a crisis or under trying circumstances,” he explains.

According to Caron Whitfield, head of marketing and distribution at Apio Groups, whether you decide to work through a broker or not, you should consider the following:

  • Ask your broker to review the current policy cover and premiums with your insurer. If you have a good track record with your insurance company, your broker should be able to negotiate a premium review on your behalf.
  • Ask your broker to shop around. Obtaining like-for-like quotes will enable you to ascertain if your premiums are market related. If a quote is obtained with cheaper premiums, it can be used as a negotiating tool to reduce the current premiums.
  • Consider increasing your excess, but bear in mind that the amount you choose must be affordable should you need to lodge a claim.
  • Remove items that are insured under your portable possessions cover, but are no longer being taken out of the house. For example, your golf clubs, or bicycle.
  • Certain insurers may offer limited mileage discounts if you are no longer driving your car as much as you did before lockdown. You may need to disclose your current mileage and sign a declaration of limited use.

What’s the long-term impact of lower premiums?

Olyott says that if the lower insurance premium was based on a premium holiday, you will have to check whether there are any future “catchup” payments involved.

He explains that payment relief may be viewed as a short-term discount, and thus it is advisable to make sure you understand the arrangement and consider the detail carefully.

“Where a lower premium has been negotiated, the impact of future realignment of risk may prove to be expensive and it may not be aligned to a normative annual increase,” says Olyott.

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