My vehicle value reduces but my premium doesn’t!?
“Why doesn’t my premium reduce when the retail value drops?”
Here is an explanation to give you a better understanding as explained by Discovery Insure 11 March 2019:
The value of your car (as a whole) is only relevant when your car is written off or stolen, these types of events only make up 15% of all Insurance costs.
The value of your car has an even smaller impact on your premium and resulting premium increases.
If you look at your car Insurance premium, 10% is made up of Admin costs, 15% is for theft or write offs and 75% of your premium is made up of parts and repair costs.
If you add up all the individual parts of your car and their value, it would cost far more than replacing your car.
Your Insurer is far more at risk for your vehicle being in an accident while you drive rather than the theft risk.
Therefore your premium increase is mainly due to inflation on parts and increasing labour costs.
We trust this explanation provides clarity as to why vehicle premiums do not reduce when the vehicle retail value reduces