Saving on insurance costs in tough times

Johannesburg - Many South Africans have been affected negatively by the COVID-19 pandemic and lockdown. For many, the recently announced, sharp petrol price increases might be the straw that finally breaks the camel’s back. 

As lockdown eases in many parts of the world and economic activity resumes, global fuel prices are rising. When you combine this with the fact that South Africa’s cash-strapped government has hiked the fuel levy to boost its own revenue, local consumers are set to feel the pinch, not only at the petrol pump but across the board as increased fuel prices drive price inflation throughout the economy. 

Those South Africans lucky enough to have jobs that they can do from home might consider that a R1 increase in the per-litre cost of petrol may not affect them too closely. After all, many people use their vehicles much less these days. The reality, however, is that “fuel price increases have a domino effect on prices throughout the economy,” says Christelle Colman, Old Mutual Insure spokesperson. 

If one only considers increased taxi fares along with the increased cost of producing and delivering food in an economy beset with job losses, wage freezes and reduced working hours and remuneration packages, already hard-pressed South Africans are going to find it significantly harder to make ends meet over the next few months. 

In short, “whether one owns a vehicle or not, everyone pays when the fuel price goes up,” says Colman. 

In this bleak environment, monthly vehicle insurance payments must stand out as one of the most obvious ways to cut costs, “easily realising several hundred rands savings a month – for very little extra risk – especially if you are working from home,” says Colman. 

The reality, however, couldn’t be further from the truth. 

“It is far costlier to be uninsured than to be insured,” says Colman. 

This is especially true when one considers the risks of driving - uninsured - on South Africa’s roads. Recent estimates show that 65 - 70% of the approximately 12 million vehicles on South Africa’s roads are uninsured. This means that if you are involved in an accident with an uninsured vehicle, you could receive a financial knock that could set you back irreversibly, especially if you are also not insured. 

Colman suggests that rather than succumb to the temptation of saving a few hundred rand each month by dropping vehicle cover, motorists should consider the following money-saving alternatives:

• Many insurers are now offering ‘pay-as-you-drive’ options, like Old Mutual Insure’s usage-based insurance (Ubi). These products offer significant premium savings, reflecting the new normal as people working from home drive less. 
• Find a broker who will assist obtain quotations from various insurers on your behalf. This will ensure that you are paying the lowest possible premium without sacrificing the benefit of good insurance cover. 
• If you are claims-free, ask your broker or insurer to reduce your insurance premium. 
• Increasing your excess will also result in a premium reduction. 
• If your negotiations with your insurer are unsuccessful, consider shopping around for better premiums. 
• If the warranty on your vehicle has expired, look for reputable vendors who will be able to service and maintain your vehicle at affordable prices. 

Colman concludes, “a good insurance policy is an integral part of a holistic financial plan. It ensures that you do not suffer a devastating financial set back should anything bad happen. During these uncertain times, there is no substitute to the financial peace of mind a good insurance cover offers.”