By: Nu Gen
Although it may seem logical that, as a vehicle’s value depreciates over time, the
insurance premium should follow suit, this is rarely the case. Far from being
unfair on policyholders, there are a couple of reasons why a decrease in
insurance premiums is not necessarily possible.
Depreciation means the value of an item decreases over time. In the case of cars, loss
of value is also influenced by wear and mileage.
Premiums tend to increase in line with inflation as time goes by. In addition, the cost
of repairs goes up year on year.
It doesn’t cost any less to replace the bumper on a one-year-old vehicle than it
does on a brand new one. The cost of parts, paint and labour increases each
Doing the same repair job to the same car will cost more in future years, even though
the value of the car is less. In addition, with the largest share of claims coming from
accident damage, the reduced total value of the vehicle has little to no bearing on the
price of the premium.
While the threat of theft of a vehicle or even a total write-off occurring following a
particularly bad accident is real, this risk is far lower than that of accident damage. It is
also therefore a correspondingly small percentage of the premium paid.
Understand your cover
In many instances, policyholders may not have read through their policy documents
and don’t know what they are (and are not) covered for. This gives rise to the
perception that the policy provides cover for the purchase price of the insured
vehicle. As the value of their car depreciates over time, the policyholder expects the
insurance premiums to do the same.
Understand the insured value of your vehicle
Cars are not insured for their purchase price but for mostly the Reasonable Retail
Value as determine by the latest TransUnion Retail Values published!
At Nu-Gen and their Panel of Insurers, the vehicles are insured for the current
and reasonable retail value as defined in your particular and applicable policy
wording, unless you have agreed to insure the vehicle on another basis which is
noted and endorsed on your policy schedule, or your policy wording and
schedule states otherwise. Policyholders can choose between insuring for the
retail, or an Agreed Value of the vehicle if applicable:
• ‘Retail Value’ is determined by the latest Trans Union Retail Value published.
The published value will change on a monthly basis as TransUnion updates
their guide with new values monthly, but the values published may not
necessarily decrease every month for all vehicles. Therefor no retail amount
is stated on your schedule because this is simply the maximum amount the
insurer will settle you at the time of a TOTAL LOSS of your vehicle. Your
premium is also not based on this value. Should you still want to know
what this amount is, you may request this from your broker who will
have access to this information on our systems which have the latest
published Retail values listed electronically.
• “Agreed Value’ is the value you agree to insure your vehicle for with your
insurer after a valuation certificate is obtained from an expert and or a
reputable motor dealer. This basis of valuation is utilised only for
vehicles classified as a “classic” vehicle and or when a vehicle is older
than 20 years.
Values also take into account the condition and mileage of the vehicle. There are no
guideline adjustments for service history and accidents, but these are included when
assessing the condition of the vehicle at claim stage.
Other factors determining insurance premiums
Other factors, which are accounted for in the determination of premiums, include:
• Inflationary pressure, which can increase car insurance premiums.
• Premiums are recalculated after a claim, with a new assessment of your
• The exchange rate also plays a role as some parts are sourced from