Why insurance is essential for young South Africans

Young individuals, who are in the process of accumulating wealth and typically do not have substantial savings, especially for unexpected expenses such as vehicle damages, third-party liabilities, theft, or damages to valuable items such as laptops, are the ones who benefit the most from having insurance.

In the below, CEO of Santam Client Solutions, Atang Matebesi, answers some common questions that young South Africans may have regarding the significance of having insurance and shares Santam offerings tailored for young individuals. 

Questions and Answers

1. Why do young people need short term insurance?

Young people need insurance to protect their own assets and in case they accidentally damage other people’s assets. In addition to this, and just like in banking, young people need to build an insurance profile to show a good track record of being insurable. The better your insurance track record, the lower your premium.

1. What kind of insurance is most appropriate for young people/ what do they tend to claim for the most?

Young people usually claim for vehicle damage/theft, house contents, and personal and portable items like cell phones and laptops. When considering what to insure, it helps to think about the items that would be financially devastating if they were lost or stolen. For example, if you are renting and don’t need home insurance, you may still want house contents insurance particularly for items like your TV, white appliances, etc. as they would be costly to replace.

1. It is commonly believed that young people, particularly those under 25 pay higher premiums for insurance due to their generally perceived higher risk level/ more reckless behaviour, etc. Is this true and if not, what are the facts associated with insurance premiums for young people under 25/30 years of age?

Yes, in general younger individuals are perceived as a slightly higher risk for car insurance and the data shows they generally have a higher frequency of claims and when they do claim, their claims are generally higher than those of other age groups. One particular way to reduce your risk as a young person is to install a vehicle driving behaviour tracking device (i.e. a telematics device tracker) that allows you to show good driving behaviour and also alerts you if you drive into high risk areas. Installing the latter will lead to reduced premiums on your vehicle insurance Evidence of better driving behaviour leads to a lower monthly premium.  

1. What kind of insurance products are suitable for young people?

Our younger clients want insurance that:

1. a) Is affordable,
2. b) Is highly accessible (e.g. WhatsApp/embedded in other products/journeys),
3. c) Accommodates the fact that they have few assets,
4. d) Has an attractive, culturally relevant brand personality,
5. e) Is rewarding,
6. f) Connects them to a compelling vision and purpose.

Therefore, it is not so much what the insurance product covers – this will still be vehicles, furniture, clothes, bicycles, phones, laptops, pets, emergency expenses, etc – but where, how and why the products are suitable for young people.

1. What factors do insurers look at when determining an individual’s risk profile?

One of the most important factors insurers look at are your previous claims. They check details such as why you claimed, and the frequency of your previous claims, as well as the magnitude of such claims. Specific client profile data also gives an indication of the risk profile – details such as age, location and security measures of the risk, size of insured assets in terms of value, as well as type of insured items especially related to vehicles.

1. What can young people do to improve their risk profile/ bring down their monthly premiums – can they opt for higher excess?

Yes, opting for a higher excess does reduce premiums, but must be an excess that would be affordable to the client. With a higher excess, the client would not submit claims that are relatively lower than the excess and would pay for those claims themselves. As a result, these clients can expect a lower renewal increase given the insurer would not have paid out those smaller claims.

1. What factors, beyond one’s risk profile, impact insurance premiums for vehicles and households?

The location of the vehicle and home is a factor as different areas are prone to different types of risks such as flood risk, hail risk or increased frequency of theft/burglary.  In the case of car insurance, the type of cover bought (i.e. limited or comprehensive) also affects the premium the client will pay – with comprehensive providing more cover but of course attracting a higher premium.

1. What factors should young people look at when comparing insurance policies from different insurers to ensure they are comparing apples with apples?

They should compare the excess structures, types of cover provided, terms and conditions of the policy, value added services, claim overturn ratio and customer reviews. A reputable claim paying record is also very important since claim payouts are ultimately what clients want from their insurer.

1. How can working with a broker benefit young people when purchasing insurance?

Brokers have sound knowledge of the insurance environment and are able to give good advice on insurance matters to protect their clients.