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Press Offices > Short Term Insurers

Hollard Insurance
Press Office Feature : Less Risk means Less Premium – and ‘experience’ gets a break

Company: Hollard Insurance
Author:Erik Harkema
Email:[email protected]
Posted:26 Aug 2007

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Response to the letter from an ITInews reader

The writer of this letter certainly raises legitimate and significant concerns about the state of our roads which should be a concern to all South Africans, particularly drivers, and we all need to get busy and do what we can to lobby for this to be sorted.

But let’s talk about the insurance issues raised

Age And Experience:

From an insurance perspective, road conditions and driver behavior obviously affect the accident rate.  From Hollard’s point of view, experienced drivers with a good track record, whose skills help to cope well with all driving hazards and road/weather conditions, do benefit in the underwriting process and premium calculation. 

The novelty and additional bonus of Hollard’s Pay As You Drive concept is that thanks to GPS technology, we are also able to adjust the premium depending on how much mileage a person does.  This means that given two drivers with the same level of experience, Hollard’s Pay As You Drive will charge a lower premium to the one who drives less.

Save When On Holiday: 

This also means if a person takes an extended holiday without their car, their premium will be less during that period.  Why should they pay the same premium while not driving their car on our risky roads – described so well by the writer?   


But it is interesting to note that changes in South Africa mean that the ‘inexperienced’ driver is no longer only in the 18 to 25 year age group.  Hollard’s records show that ‘inexperienced’ and ‘first time’ car owners can now be 35 to 45 and older which means ‘age’ is no longer the key to experience from a driver risk point of view. 

SA vs UK:  

We’re not quite sure why the writer raises the subject of the UK, but an interesting point is that because of our high crime rate in South Africa, the fact that a tracking device with all the standard security features is included in the Pay As You Drive ‘package’ is a very appealing benefit for South Africans.  In the UK, however, where the crime rate is lower the inclusion of the tracking system isn’t such a selling point or attraction to buyers of insurance.

The Risk / Premium Link: 

Concerning Hollard’s Pay As You Drive concept, the ‘drive less pay less’ concept is mainly  about how much time a person spends on our roads and therefore how much time that person is exposed to the ‘risk’ of having an accident. 

So, if a person spends ten minutes driving to work and back each day, their risk is much less than a person who spends two hours or more a day driving in the conditions described very well by the writer.  All the driving conditions described so clearly help to highlight why those who spend less time on our roads deserve a fair break when it comes to insurance.

Business Loading: 

An extra benefit brought about by the ability to accurately monitor mileage is that no ‘business usage’ loading is charged with Pay As You Drive.  This business usage loading can be as high as 30% but with Pay As You Drive the focus is on how far you drive and not why you go there. 

In addition, quite a few business people have company cars and a privately owned vehicle, sometimes used for business.  So their private car no longer has to be insured to include a ‘business use’ loading on the premium. 

We encourage more people to be involved in drawing attention to things that need sorting and compliment the writer of this letter for getting involved and caring to take action. 

Keep a safe following distance!

Erik Harkema is the Manager, Actuarial Team, Hollard Insurance

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