Can my car insurer cancel my policy if I claim too often?

CANCELThe accident and claims record of high profile politician Tony Yengeni have made headlines this past weekend. I had the privilege of sharing a conversation with Tony earlier this year – and our conversation focused more on road safety than car insurance. It is however important to reflect on the data referred to in a story in City Press and discuss the reference thereof to car insurance.

Background information to claims history

City Press has reported that an insurance company paid out R1.3m after a luxury Maserati GranTurismo belonging to Yengeni was wrecked in a high-speed collision three months ago. The records they make reference to revealed that this vehicle smashed into a barrier on the N1 near Cape Town on August 22 after he hit an “enormous puddle of water in the roadway” and lost control of the car.

It has also been revealed that many more insurance claims have apparently been paid out by insurer Santam over the past five years for damage to vehicles owned by Yengeni and his wife.  City Press has revealed that since 2005 Santam has paid out no fewer than nine claims for damage to vehicles owned by the Yengenis, including a Mercedes-Benz, a BMW M5, a BMW X6 and a BMW X5.

In August and September this year the company paid out R19 000 for damage to a Volkswagen Eos, more than R7 000 for a BMW X5, R8 700 for damage to a BMW X6 and R1.3m for the Maserati.

Why do we make reference to these claims?

Even though it is somewhat fascinating that City Press was able to find this information to then reveal this in public – we do not wish to speculate on the accidents and the claims processes.

What we would like to do is rather refer to insurance companies and their obligations. Every driver might go through a bad patch of accidents – and these are just one of the risks that a car insurance company takes when quoting a client and then concluding an insurance agreement. I had the unfortunate experience of an accident at an intersection merely 3 weeks after the purchase of my car!

Obligations of the car insurance company

An insurance company, once it has concluded the insurance agreement, is obliged to honour its commitment and make payment in the event of a valid claim. If the insured vehicle owner has operated this vehicle within the Rules of the Road, and has not breached any of its obligations – the insurer has no choice but to make payment.

Premium Increases and cancellation of policy

It is to be recognized that an insurance company is operating in a business environment and has to make decisions that make business sense. Taking on too many risks will not be sound business and will not be accepted by the shareholders.

The due diligence required from an insurance company starts long before a claim is submitted. To briefly summarize the duties of the car insurance company, we could say it includes:

  • To consider whether to quote on a specific client or rather not to provide a quote
  • To calculate the correct car insurance premium for the risk profile of a specific client
  • To adjust the car insurance premium when the risk profile of a client changes
  • To cancel a car insurance policy if the risk of accident claims become unacceptably high

High claims record and risks to the insured vehicle owner

Every accident claim and payment made by an insurance company is carefully noted. This increases your risk to the car insurance company and will place an upward pressure on your monthly car insurance premium payable. The car insurer will raise car insurance premiums and if these claims continue the car insurer may decide that the client presents an unacceptable risk and notify the client that his insurance contract will be cancelled.

The dilemma for the client is that even though there are many other insurers around – he will each time be confronted with the question “Have your insurance ever been cancelled …”. The next insurer might well decide to provide insurance cover – but a disclosure that your car insurance has been cancelled will necessitate closer investigation, more disclosures and most possibly very expensive car insurance premiums!

We would like to urge all vehicle owners to drive with caution and to be alert to the consequences of accidents –not only on life and limb –but also on their financial well-being!!

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