Why Your Short-Term Insurance Premium Changes at Renewal
This BaCor FSP article explains why short-term insurance premiums can change at renewal, why the value of a vehicle is not the only pricing factor, how claims history and excess structures affect premiums, and why full disclosure is essential when changing insurers.
Many clients feel frustrated when their short-term insurance premium increases at renewal. A common reaction is: “But I did not change my car,” or “My friend drives a cheaper car, so why is my premium higher?” The reality is that insurers do not price only the car or the item insured. They price the risk attached to the client, the asset and the expected cost of future claims. That is why renewal pricing can change even when it feels as if nothing has changed.
Why premiums change at renewal
It is not realistic to expect a policy premium to remain exactly the same year after year. Insurance is affected by inflation, labour costs, imported parts, paint, specialised repair tools, weather-related losses, theft trends and broader claims inflation in the market. Even where a vehicle is older or worth less than before, the cost to repair it may still rise.
In South Africa, motor claims inflation continues to be influenced by replacement-part costs, vehicle repair costs and broader pressure on the insurance market. Industry commentary has also highlighted that vehicles which may previously have been repaired are increasingly at risk of being written off where repair costs become too high (Santam). This means that an older or cheaper vehicle does not automatically guarantee a lower premium.
What is a risk profile?
A risk profile is the insurer’s view of how likely it is that you may need to claim, and how expensive that claim could be. It is not only about the insured value of the vehicle. It can include factors such as your licence history, claims history, regular driver, overnight parking, area, usage, annual mileage, vehicle theft risk and security features.
| Risk Factor | Why It Matters |
|---|---|
| Claims history | Frequent claims, consecutive claims or high claim values may indicate a higher likelihood of future claims. |
| Licence and driving experience | Insurers may view less experienced drivers as higher risk, depending on the class of cover and underwriting criteria. |
| Overnight parking and area | Where the vehicle is kept overnight can affect theft, hijacking, vandalism and weather-related exposure. |
| Vehicle type and repair cost | Some vehicles may be cheaper to buy but more expensive to repair due to parts availability, technology or imported components. |
| Usage and mileage | A vehicle used more often, or for higher-risk purposes, may carry a different risk profile from a vehicle used occasionally. |
| Security features | Tracking devices, immobilisers, secure parking and other measures can affect the way the risk is assessed. |
Why a cheaper car does not always mean a cheaper premium
A client cannot simply compare their premium with a friend’s premium and assume something is wrong because the friend’s car is cheaper. A lower-value vehicle can still attract a higher premium if the driver is less experienced, has a weaker claims history, parks in a higher-risk area, uses the vehicle more often or presents a greater overall underwriting risk.
On the other hand, a more expensive vehicle can sometimes be priced more favourably where the overall risk profile is stronger. The monthly premium is therefore not determined by vehicle price alone. It is determined by the chance of loss and the likely cost of that loss.
Important: Lower insured value does not automatically mean lower risk. An insurer considers the full risk profile, not only the market value of the vehicle.
Why claims history matters so much
Claims history is one of the biggest drivers of renewal pricing. If a client has claimed often, or if the total cost of those claims has been high relative to the premium paid, insurers may view that client as more likely to claim again. Consecutive claims, frequent small claims or a poor claims ratio can all influence the way the insurer prices the policy at renewal.
In some cases, this can lead to a higher premium. In other cases, it can lead to stricter terms, increased excesses, additional security requirements or changes to the insurer’s appetite for the risk.
Premium is not the only number that matters
Many clients focus only on the monthly premium, but the excess structure can change significantly at renewal. Where claims history has been poor, or the loss ratio has become unsustainable, insurers may increase the excess in order to keep the premium from rising even further.
In simple terms, the insurer may be prepared to keep the monthly premium more competitive, but only if the client carries more of the first part of any future claim. This is why clients should never look at premium alone at renewal. The excess must also be checked carefully.
Lower premium
A lower premium may look attractive monthly, but it must be considered together with the excess, cover limits and conditions.
Higher excess
A higher excess may reduce the monthly premium, but it can become expensive when a claim actually happens.
The role of voluntary excess
A higher voluntary excess can reduce the premium because the client agrees to carry a larger share of the risk. However, that decision must be made carefully. If the excess becomes too high, the policy may look affordable every month while becoming difficult to use at claim stage.
Proper advice is important because lower premium does not always mean better value. The right question is not only, “What is the cheapest premium?” The better question is, “Is the cover, excess and risk structure still suitable for the client?”
Why honest disclosure is essential when taking new insurance
When a client applies for new short-term insurance, the insurer or broker will ask underwriting questions so that the risk can be assessed properly. In practice, many proposal forms in the South African market ask for details of claims or losses over a specified period, often the last three years, although some products may ask for longer periods depending on the class of business.
The key principle is simple: if the insurer asks for claims history, it must be disclosed fully and accurately. Incorrect or incomplete information can affect whether cover is granted, the terms on which cover is granted, the premium charged and whether a later claim is paid.
The broker’s duty to act properly
The duty is not only on the client to answer honestly. The broker or adviser also has duties under the FAIS General Code of Conduct to act honestly, fairly, with due skill, care and diligence, and to ensure that information provided to clients is factually correct (FAIS Ombud).
The Code also requires the provider to obtain enough information about the client’s needs, circumstances and risk profile in order to give appropriate advice. For this reason, proper underwriting questions, accurate disclosures and clear client records are not administration for the sake of administration. They are part of responsible insurance risk management.
Claims history is not always hidden from the next insurer
Clients should also understand that claims history is not always hidden from the next insurer. South African market practice includes the use of shared insurance data, underwriting records and claims information. Policy wording in the market commonly allows underwriting information and claims information to be verified against recognised sources or databases and, in some cases, shared with other insurers or their agents.
This is one reason why trying to hide claims history is extremely risky. If the facts are wrong at application stage, the risk is priced on the wrong basis. The consequences often appear later, when a claim occurs and the client needs the policy most.
What happens if someone lies?
If a client lies or withholds material information, the consequences can be severe. Incorrect or incomplete information can affect whether cover is valid, whether the insurer would have accepted the risk, what premium should have been charged and whether a claim is paid.
If a broker is careless, submits incorrect information, fails to verify obvious discrepancies or knowingly makes false statements, there can also be serious consequences. Ombud and industry guidance repeatedly emphasise that accurate disclosure matters because it goes to the heart of underwriting and claims decisions (National Financial Ombud Scheme).
If an insurer or its representative gives misleading information, there can also be consequences. In short, honesty and accuracy are not optional for any party in the insurance chain.
The BaCor FSP approach
BaCor FSP believes a renewal should never be treated as a simple annual increase letter. A proper renewal review means checking whether the premium is still competitive, whether the excess structure remains fair and affordable, whether the underwriting details are still correct and whether the client’s risk is being presented properly to the market.
We are proud of the strong relationships we maintain with both our clients and our insurer partners. We fight for better premiums wherever possible, push for the lowest reasonable renewal increase and work hard to structure cover in a way that is sustainable, accurate and fair.
Sometimes that means negotiating on premium. Sometimes it means negotiating on excess. Sometimes it means correcting underwriting information so that the client is presented properly. In every case, our goal remains the same: to protect our clients properly while keeping their insurance as competitive as possible.
Final thought
The most important point for the public to understand is this: insurance premiums are based on risk, not emotion, comparisons with friends or the price of a vehicle alone. Renewals are affected by inflation, claims costs, repair trends, theft patterns, driving history, licence history, overnight parking, usage and overall claims experience.
When changing insurers, full honesty is essential. Claims history and prior insurance information must be disclosed correctly when asked. If the facts are wrong, the risk is wrong. When the risk is wrong, the consequences usually arrive at claim stage.
Sources
- Santam – 2025 Insurance Barometer highlights repair cost and risk trends
- Bryte Insurance – Insurance Cost Insights, July 2024
- Nedbank – Myths and facts about car insurance premiums
- AutoTrader – How to lower your car insurance premiums in South Africa
- FAIS Ombud – General Code of Conduct for Authorised Financial Services Providers and Representatives
- National Financial Ombud Scheme – Mis- or Non-disclosure guidance
- BaCor FSP – Insurance Risk Management