How driven are you to find better cover?

PF 26Jan insurance update2 IOL PF Illustration: Colin Daniel

Increasingly, insurers are using telematics to induce you to drive better on the promise that if you do you will be rewarded with a lower premium.

Telematics is information technology that can be used to track and recover your vehicle if it is stolen, and/or monitor your driving behaviour.

It’s an attractive proposition, and not only because we all think we’re good drivers. It’s appealing because everyone wants to pay less on insurance and have a measure of control over how much they pay. If your insurer can incentivise you to drive better and reward you for it, everyone’s a winner. That’s the theory.

But the reality is that we aren’t all good drivers, and if you drive badly the technology will prove it, resulting in you paying according to the risk you pose to the insurer. You could, in some instances, end up paying a higher premium.

The use of telematics is increasing competition among insurers seeking to attract policyholders who are a good risk. This may result in more insurers vying for your business and competing on price. But be careful not to compare insurers’ policies on price alone. (See “What to look for when comparing quotes”)

The country’s largest short-term insurers – Santam, Hollard and Outsurance – all use telematics in policies that reward you for driving well or less (limiting your mileage), or a combination of both.

OUTSURANCE

Outsurance launched Safe Driver almost two years ago, Ernst Gouws, the chief executive of Outsurance, says.

Safe Driver is comprehensive vehicle cover that rewards you for driving well and less, and not a lot at night.

The product suits people who typically keep within the speed limit, do not accelerate or brake harshly, do not drive through corners at excessive speeds; drive less than 15 000 kilometres a year (or 1 250km a month), and do not often drive at night, which is when many accidents occur.

Outsurance uses Tracker Skytrax to monitor your driving. It will cost you R55 a month and you will be required to sign a two-year contract. The tracking device provides Outsurance with detailed reports on the position, speed and acceleration of your vehicle – and this information is used in the determination of your premium.

At the end of each month you get a report on your driving behaviour over the past 12 months. You can also view your report online.

Outsurance guarantees your premium for a year, but on the anniversary date of the policy your driving behaviour is reviewed and if you have driven well and not made any claims, you can look forward to a saving of up to 20 percent on your premium.

Santam

Policyholders who take out comprehensive cover with Santam have the option of subscribing to LiveTrack, a vehicle tracking and recovery service that also monitors driver behaviour. If you opt for this policy, you have to sign up for a three-year contract, which will cost you R162 a month, and R39 a month after three years. Installation of the device is free.

Alan Browne, the head of Personal Lines at Santam, says clients get a discount of up to 20 percent on their premium when signing up with LiveTrack and an additional discount when renewing the policy.

At Santam, driving behaviour refers to distances travelled, times travelled, speed of travel and frequency of travelling.

Clients can access the LiveTrack website anytime to generate trip reports or a tax logbook.

Browne says LiveTrack is popular among younger people because insurance for young drivers is expensive. “Those who perceive themselves as safer drivers like it and so do parents, because it gives them a measure of security in being able to track their child’s whereabouts.”

Hollard

Hollard pioneered pay-as-you-drive insurance in South Africa in 2006, Shaun Neuhoff, the general manager of direct motor and household portfolio at Hollard, says.

Hollard’s Pay As You Drive options are designed to cater to your specific driving needs. The options are as follows (the number in the option name indicates the monthly distance in kilometres insured): Drive500, Drive750, Drive1000, Drive1250, Drive1500, and DriveMax (for unlimited kilometres per month).

Neuhoff says contracts are structured in a similar manner to cellphone contracts, with a fixed bundle of kilometres and a variable premium for mileage in excess of the contracted bundle.

Hollard tracks your mileage using Tracker Skytrax.

There is no fee for the device or for installation, but you will be required to sign a three-year contract. The monthly subscription is R55 but does not include a stolen vehicle recovery service. In other words, it is for logging your mileage and monitoring your driving behaviour only, Neuhoff says.

Every month a statement is mailed to you, providing you with an itemised trip summary.

Neuhoff says the potential premium saving between a normal premium and the lowest mileage option (500km) could be as much as 35 percent.

Discovery Insure

A relative newcomer to the short-term insurance market, Discovery Insure is leading the way, with the most policyholders (among all insurers) opting for a telematics device, Anton Ossip, the chief executive of Discovery Insure, says. Since launching DQ-Track 18 months ago, 30 000 drivers have opted for the service.

Discovery offers the usual types of vehicle insurance and DQ-Track is optional. You may opt for comprehensive cover without DQ-Track.

If you opt in, there’s no cost for the device or to have it fitted, and nor is there a monthly subscription fee. But you will pay a monthly fee of R55 to belong to Vitalitydrive.

Policyholders aren’t locked into a long-term contract on their tracking device and can cancel it without paying a penalty.

Unlike some insurers, Discovery Insure uses its telematics information more as a carrot than a stick.

Ossip says Discovery seeks to reward positive behaviour rather than punish bad behaviour.

For driving well, Discovery rewards drivers with points. You can earn up to 750 points a month based on how well you drive. You can also earn points by improving your driving knowledge and awareness and making sure your vehicle is safe to drive.

Other rewards include cash back for filling up at BP – up to 50 percent – and discounts for buying at Tiger Wheel & Tyre.

Clients are encouraged to put their car through an annual multipoint check, and they score points for doing this.

Only if you score less than 200 points a month consistently over a year, Ossip says, would Discovery Insure “consider your driving style in addition to the usual factors to determine your annual premium increase”.

The cash back on your fuel purchase can be viewed as a premium reduction, Ossip says. For example, if your premium is R800 a month and your fuel reward is R400, you are effectively paying half for insurance.

You receive your cash back into your bank account at the end of each month, as opposed to having to wait until the end of the year to receive your reward.

Discovery Insure will double your fuel cash-back reward if you choose to have it paid into your Excess Funder Account, which you may use to pay for the excess on a future claim.

What to look for when comparing quotes

When comparing car insurance quotes, it may be tempting to make a decision based on the premium. But choosing a policy based on premium alone isn’t wise. You also need to carefully consider the benefits of the policy.

Make sure you are comparing apples with apples, Ernst Gouws, the chief executive of Outsurance, advises. The things to look out for include: the type of cover offered, what excess you will have to pay in the event of a claim (is it a fixed amount or a percentage of the claim amount, and are there other “penal excesses” which apply?), and what commissions and fees are payable?

Also find out about no-claim bonuses. Some bonuses, like Outsurance’s OUTbonus, pays you back 10 percent of all your premiums after three claim-free years. Other bonuses pay out far less, Gouws says.

Anton Ossip, chief executive of Discovery Insure, says other important questions to ask yourself include whether you are covered for the retail or market value of the car, whether your vehicle can be driven by any licensed driver or by you only, what the vehicle can be used for (the more restricted the use, the lower the premium), whether you are covered for hail or if you need to pay an extra premium for this, whether car hire is included and for how long, and whether your insurer uses manufacturer-approved panelbeaters for vehicles within warranty.

Consider your specific needs, Shaun Neuhoff, the general manager of direct motor and household portfolio at Hollard, says. “Some insurers offer niche products aimed at specific segments of the market. Try find out if there is a niche product that suits you – in terms of your age, gender, the distance you drive, how you drive, your industry, membership to a specific union – and whether the niche product is cheaper for you,” he says.

Neuhoff says some products are cheap because the insurer has removed some of the typical insured events contained in most motor insurance products – for example, the repair of your car after an accident or hail damage.

Excesses vary dramatically from insurer to insurer, so check the policy wording carefully, Alasdair Farquharson, an independent broker at HBIB Insurance, advises.

Neuhoff agrees. He says you must pay special attention to voluntary excesses. “Most policies have a compulsory excess, but insurers will usually offer you the option of adding a voluntary excess in exchange for a cheaper premium. This saving may not be beneficial if you end up having a few claims over a short period of time.”

Types of car insurance

Different types of insurance cover you for more or less risk, according to how much you want to spend. They are:

* Comprehensive. This type of cover is all-inclusive, meaning your car is covered against most risks, such as theft, damage to your car and a third party in the event of an accident caused by you. Watch out for typical exclusions. Don’t assume that your comprehensive policy includes cover for: towing and storing your car following an accident; free car hire following an accident or the theft of your car; hail damage; or cover for your sound system or canopy.

* Fire, theft and third party. As the name suggests, this cover is limited to covering your vehicle in the event of fire, and theft and for third party liability – meaning the insurer will pay out for the damage to the other party’s car in an accident, but not for the damage to your vehicle.

* Third party. This is cover for any damage that you cause to another party’s vehicle, but it provides you with no cover at all. With this type of cover there’s no protection for you should your vehicle get stolen or destroyed in a fire. There is the bare minimum level of cover.


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