Top tips for brokers: Sometimes premiums go up when you think they should go down…
Have you ever been surprised when a premium you thought would go down, goes up? While it may seem like this is happening for no apparent reason, there is actually a lot of science that underlies the Brolink rating structure.
As you know, if a motor vehicle had an accident last year and the cost of repairs last year was say R10 000, the cost of repairing the identical damage this year will be higher – maybe R10 500 or R11 000. In the meantime, the sum insured has probably been reduced due to depreciation. Under a traditional rating structure this results in the premium reducing, even though the risk might have increased in real terms.
To counteract this, our modern Brolink IV rating structure uses the vehicle’s age as a rating factor and a loading is applied to the premium as the vehicle gets older. This loading factors in the ongoing depreciation of the vehicle’s settlement figure in case of a total loss.
So once a vehicle reaches a certain age and the premium on that vehicle is recalculated for whatever reason – anniversary, NCB adjustment, sum insured adjustment, etc. – the age loading will start to increase. The effect on the premium could, however, be up or down, depending what other rating factors change at the same time. Even if you change nothing on the screen, the usual driver age will more than likely be higher and this may have the effect of reducing the premium. However, this is not necessarily true in all cases as it also depends when the premium was previously recalculated. The driver’s age may not have changed since the previous recalculation.
As you can see, it’s not a simple formula. The combination of changes in the sum insured, usual driver age, age of the vehicle, plus any other changes being made at the same time could see the premium going up or down. The relative changes determine the final outcome.
The insured will most probably query an increase in premium when they were expecting it to go down. Brolink IV will always rate each risk individually and not cross-subsidise. We stand by the system’s accuracy, which is improved by the scientific rating methods it uses.
Of course, we are more than happy to discuss any aspect of the system with brokers and insurers through our marketing team. If you have any queries, contact:
Phone: +27 (0) 12 673 0000