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11Jun 2019

How our South African weather affects your premiums

It seems like the world’s split down the middle when it comes to global climate conditions. From what we’ve seen on social media, you can either be a climate change denier or an activist. Or to put it another way, you either believe that we’re destroying the planet and need to change the way we live on this earth or you believe that this is all a total farce and everything is fine, so just bring on more bacon!

To be honest, we’re not entirely sure that either camp is 100% correct. It doesn’t feel very balanced.

We’d be fools to ignore the fact there’ll always be an angle through which greed and ambition can find a home, regardless of the cause. So, yes. The climate change cause is probably being monetised by some and used as a publicity platform by others. But that doesn’t mean that our climate isn’t changing.

Strangely enough, this is a hot topic in the insurance industry and as innovators of insurance, we’ve been giving this some thought.

Here are our thoughts on how climate change affects what you pay for insurance.

Starting with… Is this a real thing for insurers?

Yes. Very much so. You see, since the 70s, there have been annual stats showing an increase in insurance claims. Particularly those due to natural events, like hail, storms, and drought.

These claims have amounted to billions of Rands, which is nothing to be ignored.

How the climate affects insurance

Not to be super boring, but the reality is that climate change has resulted in an increase in extreme weather patterns. You’ve probably noticed the oldies nattering on about how much or how little it’s been raining over the years, how hailstorms have been getting worse, or how much hotter it is than it used to be… That kind of thing. They’re not wrong. Just think about some of the weather-related tragedies South Africans have experienced, like the Knysna fires, the drought in the Western Cape, severe floods and storms in Gauteng, or the recent floods in Durban…

Apart from the very real suffering that comes with this, 1 other negative consequence is that there’s been a consistent increase in the claims lodged in our country. Which has played a role in increasing the price of insurance.

A little look into why the price goes up

There are many reasons why you’d pay more for insurance, following a series of weather-related incidents. But the 1 we want to talk about is reinsurance.

Your insurance company pays premiums to a reinsurer (ours is Munich RE) so that if they can’t cover large-scale pay-outs, they can call on their reinsurer to pay out your claim. Reinsurance is a global business. Nothing small about reinsurance companies, no sirree. And because it’s global, international events will affect the reinsurer’s pocket, which could then affect your South African insurer’s pocket in the form of higher premiums… Which trickles all the way down to your pocket.

And here we come to climate change. Again.

Climate change leads to natural disasters and so reinsurers look at global climate change and try to predict where things will get ‘worse’ and make financial plans so that they can cope with paying out claims. It’s all very complicated, but does go some way to helping you understand the bigger picture of how climate change affects your car insurance premium.

Feeling a little hopeless? Don’t. We’re still here. And we’re fighting the good fight for you to pay the fairest price for insurance. For starters, we’ve found a way to decrease the cost of comprehensive car insurance. When you join our kingdom, your premium will go down every month in line with the depreciating value of your car. Because that’s fair.

We’ve even got super cheap comprehensive home insurance that’ll help you pay for damage to your property when things like hailstorms and fires happen.

Click here or call our royal client care team on 0860 50 50 50. They’ll sort you right out!