Many policyholders worry that their insurance premiums will automatically spike after a claim has been submitted. This common misconception even deters some people from using their insurance when they need it most.
Youlon Naidoo, executive head of claims and procurement at MiWay Insurance, is setting the record straight: “The reality is that not all claims result in increased costs. Premiums are reviewed annually, usually based on which month you took out your policy, rather than being directly tied to whether you've made a claim or not.”
By better understanding the factors that influence premium adjustments, Naidoo believes that consumers can make more informed decisions and avoid unnecessary financial strain.
The role of claims in premium adjustments
While it’s true that claiming can impact your premiums, it’s not the only factor. Insurance companies consider various elements, such as the frequency of claims, the nature of the incident, and the overall risk profile of the policyholder. For instance, a client who claims frequently or for minor incidents may see a rise in premiums over time, as this can indicate a higher risk.
“It’s not advisable to claim for everything. Even if you’re not directly responsible, like in the case of an accident, submitting multiple claims can still influence your premium. Insurance is designed to protect against significant losses, so it’s wise to consider whether a claim is necessary in each situation.” says Naidoo.
Mitigating risk and managing premiums
Naidoo encourages policyholders to adopt strategies that reduce the likelihood of needing to make a regular claim. “Regular maintenance, safe driving habits, and taking precautions to secure property can all help minimise risks. By doing so, consumers can potentially keep their premiums stable.”
He goes on to highlight the importance of aligning one’s insurance coverage with the current risks they face. “Businesses, especially, should conduct regular risk assessments and update their policies to reflect any operational or environmental changes. This proactive approach not only helps in managing premiums but also ensures adequate protection against both existing and emerging risks.”
Naidoo states: “Often clients forget to seek out an annual review and opt-in for the automated increases on their policies, which are often aligned with inflation and other mitigating factors, without assessing if their cover still suits their needs. Insurance is about managing current risks, and by being mindful of your policy anniversary, when and how you claim, you can have more control over your premiums.”
Navigating the complexities of insurance
Understanding how premiums are calculated and what factors influence them can help consumers make more informed decisions about their coverage.
Naidoo reiterates that ensuring alignment between one’s cover and risk profile is key. “By doing so, you not only protect yourself or your business against potential risks but also avoid unnecessarily inflating your premiums. Regular policy reviews, coupled with effective risk mitigation, are critical to maintaining both adequate protection and cost-effective insurance,” he says.
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