Why young South Africans also need insurance

South Africans are unfortunately notoriously bad savers. A recent study showed that less than 30% of people save toward an emergency fund for when something unexpected – and costly – occurs. For young people specifically, who are still building up their financial means, not having a fall-back for when things go wrong could be seriously costly.

This is according to Marius Kemp, Head of Personal Lines Underwriting at leading insurer Santam, who says that National Youth Month presents a good opportunity to remind people about the value of insurance and the freedom it provides for peace of mind.

“Insurance is traditionally seen as a grudge purchase, particularly amongst 18- to 25-year-olds who are starting their exciting career and financial journeys”.

“Coupled with this, most South Africans do not have a ‘rainy day fund’ for emergencies. Typically, most young people who are still working on starting to build savings, would not have R20 000 to R100 000 (or more) saved up and waiting to cover the cost of vehicle damages following an accident or paying for another third-party vehicle, or to cover theft or damages to assets and movable items such as laptops and high-end mobile phones. Arguably, young people need insurance even more than more established adults with a nest egg”.

Kemp explains that young people need insurance in order to protect their assets, have protection from legal liability and to build an insurance profile as they are in the beginning journey of their lives.

“This is especially important because, in general, younger individuals are perceived as a slightly higher risk – depending on which phase of their lives they are in. Starting to build a good insurance profile early on will be beneficial – much like a good credit history. It may also help to bring down premiums in the longer term, which are typically higher amongst 18 to 25 year olds due to the higher risk profile.”

Speaking about factors that are considered when determining an individual’s risk profile, Kemp says that previous claims history is very important. He adds that specific client profile data such as age, location and security measures of the risk, size of insured assets in terms of value, and the type of insured items especially related to vehicles are all considered by insurers.

According to claims trends from Santam, young people primarily tend to claim for house contents, personal effects such as portable technological equipment (including cell phones and laptops) and vehicle claims.

“The frequency and severity of vehicle claims for young people (18 – 25) are much higher than older clients. We would suggest that young drivers take out products that help to promote good driver behaviour where they can monitor and strive to improve their day-to-day driving.”

To improve their risk profile and possibly bring down their monthly premiums Kemp suggests that young people:

• Opt for a voluntary excess to bring down premiums;
• Beef up home and general security to be better than the minimum required;
• Install a telematics device which can also help reduce the vehicle premiums;
• Keep claims to minimum by self-insuring the low value claims would result in a lower premium increase at renewal.

When comparing insurance policies from different insurers, Kemp urges young South Africans to ensure they are comparing apples with apples.

“Looking carefully at excess structure, type of cover provided, value added services, claim overturn ratio, and reputable claim paying record especially in terms of widespread catastrophes is critical when deciding on an insurer.”

He concludes that brokers have sound knowledge of the insurance environment – and the specific needs of young people.

“A good insurance broker will give good advice on insurance matters to help you secure a product that fits into your life and budget and – most importantly – gives you the freedom to seize life’s opportunities”.

Source: FA News

Hijackers in South Africa commonly target Fords, Nissans, Toyotas, and VWs, which are in high demand on the black market across the continent.

This is according to Fidelity Services Group CEO Wahl Bartmann, who told BusinessTech earlier this year that vehicle hijackings are largely a business driven by demand and supply.

For example, While these models have historically been at high risk, the RAV 4 and Toyota Corolla Cross have climbed the high-risk scale, with the Corolla Cross only having been launched in the country in November 2021.

Since then, the crossover has consistently been on the best-selling lists over the course of 2023/24 – selling over 22,000 and earning fourth place on Naamsa’s top 10 list of best-selling cars last year.

It has remained within the top five through most of the first half of 2024. This remains true for other Toyoas (such as the Hilux), VWs (Polos), and Fords (the Ranger).

“Hijackers target specific vehicles for a specific purpose and market. The demand for Toyotas, VWs, Fords, and Nissans remains high on the black market,” he said.

As a result, Bartmann highlighted the most hijacked cars among these brands – based on the Fidelity SecureDrive base for 2023.

According to Fidelity’s latest data, the seven most high-risk models, in no specific order, are:

• Toyota Fortuner (GD6 and D4D);
• Toyota Hilux (GD6 and D4D);
• Toyota Corolla Cross;
• Toyota RAV 4;
• VW Polo (especially hatchbacks);
• Nissan NP200; and
• Ford Ranger (both double and single cabs).

It has been reported that the Fortuner and Hilux vehicles are stolen mostly for their engines, while the Corolla Cross and RAV4 are primarily taken across the border into neighbouring countries.

This is because these vehicles are well-equipped to handle African roads. Evidence of interest in cars that can manage the harsh road conditions in Africa by criminals was also mentioned by insurer Santam.

Its report noted a shift away from older, low-value vehicles with limited security requirements to more expensive double cabs and SUVs, including Toyota Landcruisers and Prados.

This aligned with the experiences of private security companies such as Fidelity ADT.

According to Fidelity, around 30% of all stolen and hijacked vehicles in the last year were taken across the border from South Africa.

Hotspot areas

In South Africa, the number of car hijackings has been increasing every year, with some provinces experiencing a greater rise in hijackings than others.

The South African Police Service (SAPS) recently presented the latest quarterly crime statistics from October to December 2023.

According to the report, 5,973 cars were hijacked during this three-month period, equivalent to approximately 66 cars being stolen daily.

This figure represents a 6.5% increase from the same period in 2022.

Carjackings are most common in South Africa’s most populated regions, such as Gauteng, KwaZulu Natal, and the Western Cape.

The top hijacking hotspots for the three most populated provinces are listed below.

Gauteng:

1. Ivory Park
2. Moroka
3. Loate
4. Orange Farms
5. Eldorado Park

Kwa-Zulu Natal:

1. Umlazi
2. Mariannhill

Western Cape:

1. Philippi East
2. Harare
3. Nyanga
4. Mfuleni
5. Delft

Source: BusinessTech

With fuel increases and the rise in the cost of living in almost every other area of life, many homeowners may be concerned about their finances. Photographer: Armand Hough / Independent Newspapers.

Households in South Africa seem to have no reprieve as they continue to face hard-hitting increases that impact their cost of living, including interest rates, electricity tariffs and rocketing food and fuel prices.

Earlier this month, South African motorists were hit hard at the petrol pumps once again by a significant fuel price increase of R1.21 cents per litre for both grades of fuel, 95 and 93 ULP and LRP.

With these increases and the rise in the cost of living in almost every other area of life, many homeowners may be concerned about their finances.

Given this impact, households may be looking for ways to cut down on expenditure to meet their monthly payment commitments.

One area you might be tempted to cut is home and car insurance but Dr Hardy Ncube from Standard Bank Insurance warns consumers to think twice before cancelling their insurance coverage as this may have far-reaching consequences and could lead to huge expenses in the long run.

Instead, he advises that people look at smarter, less risky ways to manage their expenses.According to Ncube, Standard Bank Insurance understands that South Africans are battling severe financial pressure.

• Escalating Costs: The article highlights the significant increase in expenses associated with car ownership in South Africa, surpassing initial purchase prices by 55%, due to rising fuel prices, insurance premiums, and maintenance costs.
• Economic Challenges: South African consumers face relentless economic challenges, including interest rate hikes, inflationary pressures, and escalating living costs, which further strain household budgets and necessitate careful financial planning.
• Budgeting Advice: With petrol prices surging, insurance premiums rising, and maintenance expenses escalating, consumers are advised to exercise caution in budgeting, leaving room for potential cost increases to ensure long-term financial sustainability.

In recent years, South African consumers have faced relentless economic challenges, with inflationary pressures and escalating living costs squeezing household budgets. The burden extends to car ownership, where the true expenses far surpass the initial purchase price. As petrol prices surge, the rand weakens, and inflation bites deeper, a sobering reality emerges: owning a car demands more than just monthly repayments.

A study conducted by Naked Insurance sheds light on the hidden costs of owning a vehicle, particularly in the South African context. According to their analysis, the total expenditure for maintaining a new car valued at approximately R350,000, including fuel, insurance, and maintenance, surpasses the typical monthly repayment by a staggering 55%. This revelation underscores the necessity for consumers to adopt a more comprehensive approach to budgeting, factoring in all associated expenses.

The financial landscape for South African consumers has been tumultuous, marked by interest rate hikes and persistent inflationary pressures. Despite belt-tightening measures, relief remains elusive, amplifying the financial strain on households across the nation. The relentless surge in petrol prices, soaring by over 47% since February 2021, exacerbates the financial burden, further compounded by electricity challenges and escalating food costs. As disposable income dwindles, meeting mortgage payments, car loans, and credit card obligations becomes increasingly challenging, prompting consumers to seek additional sources of income to service their debts.

In this economic climate, individuals are compelled to scrutinise their expenditure meticulously, with particular attention to the costs associated with vehicle ownership. Ernest North, co-founder of Naked Insurance, highlights the stark reality of escalating car ownership expenses over the past two years. TransUnion’s latest vehicle pricing index (VPI) corroborates this assertion, revealing an average loan size of approximately R359,000 for new cars in South Africa.

Delving into specifics, Naked Insurance examines the actual cost of owning a typical car, as defined by TransUnion, in South Africa as of February 2024. Their analysis focuses on financing a new VW Polo 1.0 TSI, priced at around R348,200. While cash payment remains an option for some, the majority resort to financing options, often accompanied by a cash deposit. A typical five-year repayment plan, with a 10% deposit and an interest rate of 13%, translates to a monthly payment of approximately R7,222.

However, the financial commitment doesn’t end there. Fuel expenses constitute a significant portion of the overall cost of ownership. Calculating an approximate petrol bill entails considering fuel consumption and monthly travel distance. With petrol prices hovering around R23 per litre, a car with a consumption rate of just below 20km per litre would incur approximately R1,150 for every 1,000 kilometres travelled. Yet, the volatility of petrol prices underscores the need for flexibility in budgeting to accommodate fluctuations.

Insurance is another non-negotiable expense, particularly for those securing loans for vehicle purchases. Comprehensive car insurance is typically mandatory, safeguarding against potential losses and liabilities. While premiums vary based on individual risk profiles, estimates suggest an average monthly premium of R970 for a VW Polo.

Furthermore, budgeting for repairs and maintenance is imperative to mitigate unforeseen expenses. Despite service plans, additional costs for consumables and major repairs must be considered. On average, maintenance expenses amount to roughly 2% of the car’s value annually, equating to approximately R6,900 for a car valued at R348,000. For vehicles without warranty coverage, additional budget allocation ranging from R7,500 to R15,000 annually is prudent to cover servicing and unexpected breakdowns.

Summing up the expenses, driving a modest car over 1,000 kilometres per month translates to annual costs exceeding R134,000. Over the five-year financing period, total expenses escalate to approximately R670,000. However, upon completion of the repayment term, the car’s residual value is estimated at around R165,000, resulting in a net cost of approximately R505,000 for ownership.

Ernest North advises consumers to exercise caution in budgeting, recommending a buffer to account for potential increases in petrol prices, insurance premiums, and maintenance costs. The accompanying table outlines the estimated monthly expenses for owning and driving a new VW Polo 1.0 TSI, providing valuable insights for South African consumers navigating the complex terrain of car ownership.

Expense Cost Car payment R7,222 Fuel R1,150 Insurance R970 Long-term maintenance (average per month) R575 Services & unforeseen maintenance R1,250 Average cost per month R11,167 Total after 60 months R670,020

In conclusion, the true cost of owning a car extends far beyond the initial purchase price, demanding meticulous budgeting and prudent financial management. As economic uncertainties persist, South African consumers must heed the insights provided and adopt a holistic approach to car ownership, ensuring long-term financial sustainability amidst challenging times.

Source: RateWeb

Founded in 1904, with headquarters in Paris, the association, better known as the Fédération Internationale de l’Automobile (FIA), is a non-profit making association that brings together 244 international motoring and sporting organisations from 146 countries on five continents. The FIA, through its affiliated clubs, is duly authorised by their governments as international driving permit issuing entities. Its mission is to assist FIA member clubs and associations with international travel and motor-related information on many countries around the world.

As reported on the association’s website, the FIA conducted thorough research on short-term insurance providers in South Africa, aiming to make choices simpler and ensure selections align with clients’ needs and budgets.

Here is what the association’s research found:

Top auto insurance providers in South Africa for 2024

• Outsurance took the lead in comprehensive coverage, offering a wide range of protection. Their policy covers theft, hijacking, accidents, natural disasters, and more. Notably, FIA said, Outsurance provides financial predictability with a fixed excess regardless of the claim’s severity. Safe drivers can also enjoy an exclusive OutBonus, a cashback reward after three claim-free years, adding extra value to their policies.
• Budget Insurance emerged as the top choice for cost-effectiveness, offering a range of attractive features. According to FIA, with some of the most competitive premiums in the market, Budget Insurance is the go-to option for those who are budget-conscious. The association stated that the variety of coverage options allowed policyholders to customise their plans to suit their specific needs and financial constraints. Additionally, the insurer stood out with a simple claims process, minimising stress.
• King Price Insurance earned recognition for its outstanding customer service. Described as having a personalised approach, the FIA said the insurer took the time to understand and meet individual insurance needs. It added that the presence of a professional and dedicated customer support team, available 24/7, ensured timely assistance for policyholders. Additionally, King Price stood out with efficient claims processing, promising stress-free handling and quick resolution.
• Discovery Insure emerged as the top choice for customisation, providing a range of notable features. With tailored plans that accommodate specific driving habits, lifestyle, and budget, Discovery allowed individuals to choose a plan that suits their unique needs, the FIA said. A standout feature was Discovery’s exclusive Vitality Drive programme, the FIA said, which offers increased benefits for safe driving and proper car maintenance. Moreover, the association said. policyholders can enjoy peace of mind with comprehensive coverage, including third-party liability, theft, and protection against damage from fire or natural disasters.
• MiWay was named the go-to choice for speedy claims processing, offering a range of key features. With a robust management system, MIWay ensured that claims are handled more efficiently compared to other providers, the FIA said. The insurer’s digital infrastructure, including a well-implemented claims portal, allowed for easy submission of claims anytime, streamlining the process for policyholders. The association added that MIWay’s customer-centric approach was evident in its highly qualified support team, “always ready to assist throughout the claims process, providing customers with peace of mind”.

Things to consider before choosing an auto insurance provider

At last count, the number of short-term insurance companies in South Africa offering car insurance, home and business insurance stood at 37.  The FIA compiled a list of key points to consider when selecting an auto insurance provider:

• Financial stability: ensure the chosen provider is financially stable to handle claims smoothly in case of an accident.
• Prices: carefully examine prices for different insurance packages. The most expensive product may not always provide the best coverage, and cheaper plans might lack critical coverage elements.
• Customer service: The provider’s customer service is crucial. Opt for a company that responds promptly and professionally to your inquiries and issues.
• Policy offerings: a variety of policy options allows you to find the perfect coverage for your specific needs.
• Claims process: investigate how the company handles claims. A provider with a quick and hassle-free claims process can save you a lot of stress in the long run.

“The key is to balance coverage and costs, ensuring you get value for your money and feel secure in your protection,” the FIA said.

Source: Moonstone

Solar has boomed in South Africa recently, and for good reason. Our prolonged electricity crisis has forced many households and offices to take charge and invest in alternative power solutions.

While we hope for smooth sailing every day, we can’t ignore the reality that, sometimes, unforeseen events arise. And we all know Murphy’s Law… Whether it is theft, floods, winds, hail, golf balls (or hail the size of golf balls), lighting, fire, or power surges – you will be remiss not to secure your investment.

There are many things to consider before installing solar. Here are a few important points:

• Reach out to your insurance broker about the best way to protect your investment.
• Ensure your roof structure can support the solar system.
• To ensure compliance with electrical regulations, the installation must be carried out by a certified electrician who will provide you with a Certificate of Compliance (CoC). Insurers may reject a claim if it is not installed by an accredited supplier.
• Solar Insurance is usually not a stand-alone product. It generally falls under your building insurance – depending on several factors, for example whether the system is fixed or not. So, make sure your solar panel system is covered under the right insurance policy to avoid a claim being rejected.
• If you live in a complex or estate, you will need permission from your body corporate for the solar installation as they will most likely be the policyholder. Additionally, as the owner, it is important to ensure that the body corporate has solar cover included, or that they increase the sum insured. This might affect your monthly levies.
• If you live in an area prone to severe weather, it’s always a good idea to double-check whether your current insurance policy covers these types of damages to your solar panels.
• Know what your excess will be on a solar claim.
• Read your policy wording carefully so that you know what is covered.

Ensuring you have the correct and sufficient insurance cover in place will give you peace of mind and protect your investment.

Take a friendly step and reach out to us – we’ll be happy to advise on your solar insurance.

Source: Voorpos