Are insurers biased? We’ve got you covered

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Are insurers biased? We’ve got you covered

Here are the criteria insurance companies use to decide what your premiums will be

Consumer journalist


In the wake of recent media reports about SA banks’ alleged racial discrimination against low-income blacks by charging them much higher interest rates than whites, some are questioning whether the same applies to insurance premiums.
When an insurer tweeted this advert: “Buhle is paying just R702pm for her 2019 VW Polo. Isn’t it time you see if you could be saving on your premium?” Phumudzo responded: “Buhle is probably white. Y’all quoted me R2,300 for a 2015 Vivo.”
Bankers and insurers will argue vehemently that their interest rates and premiums are based mainly on risk.
Smaller mortgages in riskier areas, and higher premiums for those who live in statistically riskier areas and drive riskier cars in a riskier way.
But given the warped political and social history of this country, some of the riskiest areas – in terms of all kinds of crime – were and remain predominantly home to black people.
The insurers say their underwriting departments determine risk by means of complex statistics and mathematical calculations, but assessing risk on the basis of statistics has the potential to offend, especially if the statistics aren’t current.
Ask the SA National Blood Service (SANBS).
Five years ago, the organisation abolished its blood donation policy that had discriminated against sexually active gay men, only allowing them to donate blood if they had been celibate for six months or longer.
This despite the fact that heterosexual people who engaged in risky or casual sex were allowed to donate blood and the HIV/Aids rate in SA is higher among heterosexuals.
Race never features on the list of factors that the short-term insurance industry admits to using to determine risk, but what is on that list is sexist and ageist and whatever “ist” applies to giving married people a better rate than single or divorced ones.
Yes, if you get divorced, you are considered at higher risk of making a claim than when you were married.
That’s presumably because they assume you’ll be more likely to be out partying into the small hours, which is when most accidents happen.
Drivers under the age of 25 are considered to be the highest risk, and male drivers pay higher premiums because, well, the statistics say they cost insurers more in claims than women do, despite those tired woman driver jokes.
So men under the age of 25 are considered the highest risk of all, with car insurance premiums to match.
Hence many parents list themselves as the regular driver of their son’s car to pay a lower premium.
And when they claim, the insurer will send its people to speak to neighbours and security guards and the like and, having established that the car was mostly driven by the son, they will reject the claim.
It happens a lot.
Your claims history and how you use the car also influence your premium.
If you’ve had a few claims in the past three years, you’ll be considered high risk.
And an Uber driver is considered to be a massive risk, given the time spent on the road, while on the other hand, the person who works from home is low-risk.
The car you drive counts for a lot in determining your premium, of course, and many factors going into the number crunching, including its current value, the cost of its crash parts, whether or not it’s a 4x4 – you pay a higher premium whether you go bundu bashing in it or not – and how likely it is to be stolen or hijacked.
(According to tracking company Ctrack, the VW Polo is the most hijacked passenger vehicle in the country, the Toyota Fortuner is the most hijacked SUV, and Ford is the third most targeted manufacturer.)
Where you live and how you secure your car overnight also affect your premium.
So while it does seem ludicrous that Buhle is paying R702 a month to insure her 2019 VW Polo, while the same insurer quoted Phumudzo a whopping R2,300 for a four-year-old Polo, all those other factors play a part in creating that huge discrepancy.
Gender, age, marital status, residential area, claims history and whether the car has been modified in any way, for starters.
And there’s another factor, one that a direct insurer has based a long-running TV campaign on.
If you’ve been with your current insurer for many years, and you haven’t phoned around to find out if your premium is competitive or not, you are almost certainly paying too much.
Here’s how one direct insurer put it to me: “Most insurers offer new customers a very low new business rate, in order to remain competitive in a very price-sensitive industry, which is then corrected over time.
“Keeping customers on a new business rate is not sustainable over time.”
So don’t be that loyal, longstanding client who is subsidising all those lovely low premiums for new clients. Phone around at least once a year to get car insurance quotes.
And not just from direct insurers – brokers often source cheaper quotes from traditional insurers.
Chances are your current insurer will match a lower quote rather than lose you to a competitor, especially if you haven’t claimed in a while.

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