News Article : The cost of technology on motor vehicle insurance
|Category:|| Short-Term Insurance : Motor Vehicle|
|Posted:||26 Jul 2010|
Selecting the correct insurance cover on your vehicle remains fundamentally important
The evolution within the vehicle industry has been both staggering and inspiring.
Most of the enhancements we see today are the result of technological advancements that have been made over the past couple of years. Can you imagine your vehicle without electric windows or climate control?
It is no longer a novelty to have optional extras such as rain sensored windscreens, park distance control (PDC) and even on board satellite navigation.
Some of the vehicles of today sport the latest gadgets that make them easily identifiable even at night thanks to direction-sensing and xenon lights. Yet, how many drivers stop to ask, "how do these luxuries impact my insurance premiums?"
Bumper bashing continues to increase in frequency as traffic volumes swell on our roads. Usually, the repair cost for this type of damage sustained to a vehicle is relatively low.
However, the average repair cost on a bumper with PDC will increase because of the technological components involved. A normal shattered windscreen can easily be repaired at reasonable cost, yet the average cost to replace a windscreen with rain sensors will be significantly impacted by the technology used.
This can largely be attributed to the fact that in many cases, these technologies cannot be easily repaired, but have to be replaced in their entirety. This eventually drives up the average repair cost of the vehicle.
The total cost of repairing a vehicle can typically span from initial assessment of damages to repairs and replacement of parts. This cost may be affected by many interlinked factors that are usually beyond the control of the Insurer, and has a direct impact on premiums.
If you can, amongst many other factors, control the cost of repairs, you can potentially control the impact on premiums. However, Insurers are unable to control certain factors, especially those that are coupled by inflation and currency movements.
Consumers are faced with the fact that prices for car parts do not go down. Your car may depreciate in value, but the cost of its parts will generally continue to increase, as will for example the paint and labour required for repairs.
All these increases are influenced by inflationary movements. The slightest tweaking of the technology used in the automobile manufacturing industry could impact on the cost of repairing or replacing parts.
Insurance premiums are usually determined using pricing models designed to take various factors into account. Of course, pricing models differ among Insurers as not all use the same rating factors.
Selecting the correct cover on your vehicle remains fundamentally important.
Jacques Pretorius is Managing Director of Absa idirect Ltd