Car insurers are often perceived to be the “meanies” – companies collecting premiums and then refusing to make payment when insurance claims are filed, or as companies unfairly raising car insurance premiums. I have spent some time reading about car insurance claims and have come to an interesting finding…we should spare a thought for car insurers and the constant battle they are fighting. We should perhaps rather blame some of our fellow vehicle owners for not receiving immediate or swift payment when our claims are submitted.
Car insurance companies are betting on difficult odds. Clever actuaries need to work the numbers and calculate the risk of vehicle loss or damage in a specific area. This is a rather complex process with many variables such as location, vehicle type, owner and driver behaviour etc.
Many of these risks are not easy to predict and historic data might not be able to provide guidance. On Friday we have found many visits coming to the Car Insurance Blog from searches on Google about hail damage. Horrific stormy weather in Australia resulted in hail damage to many vehicles and many owners were searching the internet to find if their car insurance covers them for hail damage.
There is nothing we can do to prevent these forces of nature or “Acts of God”. Human intervention- or the lack thereof is further adding to the pressure of increased vehicle claims.
In South Africa these variables include the rapid deterioration of roads and damage to vehicles from potholes and damage to windscreens from loose gravel and stones near road works. There has been a significant increase in claims from vehicle damage from potholes and these volumes of claims might not have been predictable last year.
Perhaps the biggest threats to car insurers have been the high levels of vehicle related crimes. Tough financial conditions have motivated crime and hijacking syndicates to target vehicle owners with hijackings and vehicle theft.
As if this is not enough of a threat, there have been numerous reported cases of car insurance fraud.
Car insurance companies are threatened with a wide variety of risks to vehicle damage and vehicle loss. They have only one primary tool in their arsenal to combat these risks – the ability to raise car insurance premiums – a measure that they are heavily criticized for.
Perhaps next time when we are confronted with escalating car insurance premiums we might consider the challenges confronting the car insurers as well!