Everyone pays a different monthly insurance premium for their vehicles. Insurance companies have advanced algorithms that determine how much a driver must pay to keep their cars insured. These algorithms use a variety of data and statistics to calculate the risks associated with each driver and to determine the likelihood of an insurance payout.
When looking to sign up for insurance, people will be met with numerous questions about their personal details, their vehicles and the cities in which they live. It is common for insurance companies to ask about your job, where your car is kept at night and whether you have other insurance policies.
The answers to these questions are fed into the algorithm and a monthly premium fee is calculated. Factors such as age, profession, make of vehicle and accident history can all determine the cost of insurance. Here are some of the factors that influence your car insurance premiums.
1. Personal information and demographics
One of the biggest determining factors for car insurance premiums will come from your personal information and demographics. Insurance companies will ask you for your age, gender, marital status and home address. They may even do a background check on potential clients to see their credit history and financial status.
These details are used to determine the likelihood of an accident or theft. Statistics from millions of other insurance cases are used to compare your personal information to those with similar people. The algorithms then convert these stats into a probability of insurance payout and a suitable monthly fee for the client.
2. The vehicle you drive
The vehicle you drive says a lot about you and your lifestyle. Obviously, more expensive cars will warrant a higher monthly premium as they are more expensive to fix or replace. However, the vehicle you drive can also be at a higher risk of theft than other makes and models. This means that even small and sensible cars can attract a higher premium because they are more of a theft target.
Some vehicle brands also increase insurance premiums because the owners are more likely to drive at excessive speeds or recklessly. Insurance companies will also ask whether your car has any modifications. Upgraded engines, large sound systems and aftermarkets rims are often more expensive to repair and often increase the monthly premiums.
3. Security risks
Insurance companies will always try to find out what security features you own that will protect your vehicle from theft. By installing a car alarm and keeping it in a locked garage at night, people will reduce their monthly insurance payment. GPS tracking systems and armed response units are also good news for insurance companies and your premiums.
Potential clients will also be asked where the car is parked during the day and what neighbourhoods it drives through in regular commutes. These details tell insurance companies how safe the vehicle is while the owner is at work and while they travel to and from the office or shops.
4. The regular driver
Insurance brokers know that some families or couples share vehicles. Having two or more drivers poses a slight problem as each individual will have different statistics and likelihoods of an accident. In these cases, the insurance company will base the monthly premiums on the regular driver – the person that will drive the car the most often
5. Driving record and experience
This factor links directly to age and experience. Younger drivers have less experience on the roads and are statistically more likely to take risks. Drivers aged 25 or younger are a higher risk for insurance companies and so their monthly payments are automatically increased. With less than 10 years of driving experience, these young drivers are seen as more likely to be involved in collisions.
Drivers between the ages of 26 and 50 are seen as less of a risk because they are more experienced and responsible. Drivers aged 50 and over can start to attract higher premiums once again. These theories are based on years of accident statistics that show that experience and age are contributing factors in road collisions.
Insurance brokers will always take inflation into consideration. This is because insurance cover is likely to last many years – the entire lifespan of a vehicle in some cases. The premiums are calculated with annual inflation taken into consideration. This is why monthly premiums are often increased automatically on an annual basis.
All of the above factors are used by insurance companies to calculate the appropriate monthly premiums for clients. If any of these factors change, clients can ask for a review on their costs and, in some instances, monthly premiums can be reduced. If a driver turns 26 or if they move to a safer neighbourhood, they can get their brokers to assess their premiums and recalculate the monthly costs.
Formex Industries is a metal forming and assembly company that supplies a variety of complex products to the local automotive industry and export market. The company is based in the Nelson Mandela Bay metropole, South Africa’s foremost region for automotive manufacturing and export.
Formex specialises in producing components for the catalytic converter industry, as well as metal components and assemblies for the various vehicles. Formex aims to become one of the foremost suppliers for the South African automotive industry by 2035, aligning itself with the South African Automotive Masterplan (SAAM) which takes effect in 2020.
Formex is a Level 2 B-BBEE supplier with over 80% black ownership, of which more than 40% are black women. The company is owned by Deneb Investments Limited – a subsidiary of Hosken Consolidated Investments Limited (HCI) – one of South Africa’s biggest true B-BBEE companies listed on the Johannesburg Stock Exchange (JSE).