Your comprehensive/ fire & theft motor insurance policy is impacted by several factors including past loss history, age of the owner of the car, use of the car, value of the car and inflation levels.
According to the Reserve Bank of Zimbabwe data, the inflation rate for December 2022 was 243.8%. We all have seen the result of the inflation on food and other services. Such a high inflation rate impacts the insurance service providers directly and indirectly in a number of ways including:
The cost of repairing your car via the price for paint, parts, and labour continues to increase in line with inflation.
For instance, if your car side mirror needs to be replaced after an accident, the cost of the mirror and the labour for repair will be high, regardless of the age of your car. In extreme cases the cost of simple repairs has been more than the insured value for old cars because of the high spare parts cost.
2. Increased cost of vehicles
Inflation generally increases the market value of your car. This also results in an increase in premiums even if the rate applied has remained the same.
In an inflationary environment there is also the risk that your vehicle value can become under-insured if not reviewed. This could lead to the application of average on settlement of a claim should a loss occur. Having enough coverage is an essential part of your car insurance policy, and reviewing the value insured periodically to keep in line with market values is important.
3. Rising costs of ancillary services
Other services associated with your motor policy also go up in an inflationary environment. For example, liability costs either for repairs or replacement for third party property damage have generally gone up. Medical costs, where you have cause third party bodily injury, also increase.
Whilst there maybe no immediate impact on your policy probably due to your good claims ratio, others may see their car insurance premiums go up. The good news is that there are ways to adjust your cover so as to maintain the current premium level for example by increasing your excess levels or bundling cover with your home insurance. For businesses there are other options like the contingent self-insurance fund, stratifying coverage across your portfolio and other solutions to lower your premium.
Talk to our team today about the cover options for your vehicles.
