Thursday, March 29, 2012

Premiums to be based on actual risk- Motor Insurance, South Africa

Premiums to be based on actual risk New technologies that track and monitor the driving behaviour of motorists are set to revolutionise the motor insurance industry in South Africa, providing businesses and consumers the opportunity to significantly reduce the premiums they are paying. According to Stewart Somerville, Managing Director at Geotab, the asset, vehicle and personnel tracking group, premiums charged by the short-term motor insurance industry have traditionally been based on the potential, rather than actual, risk that each customer poses. "Insurance premiums are based on a range of factors but are mainly decided through predictions made by a company's actuarial division on the perceived risks that consumers pose." He says that while actuarial forecasting does have merit in enabling insurance companies to assess the likelihood of a claim, new technology can now track and monitor the driving behaviour of individual consumers, enabling an insurer to provide a fairer premium to each customer. "While some insurers are already utilizing similar technology in some form, these advancements mean that insurers can base the level of premium that a customer pays on the actual scientific data collated from their client base rather than a general assumption of the risk they pose. "Statistics do show that the frequency and severity of motor vehicle accidents is highest in the younger age bracket, particularly among young men." "However, there have also been cases where young drivers have automatically had a claim repudiated due to an assumption of wrongdoing on their part without any proof and have been forced to appeal to the Short-term Ombudsman." Somerville says the fact is that some motorists, regardless of their demographic, are more dangerous on the roads than others and should be paying accordingly, while responsible younger drivers should also be paying in accordance with their behaviour. "By using new hardware such as accelerometers in a vehicle - which measures the degree of braking, swerving and harsh turns - an insurer can monitor the behaviour of a driver and consequently offer a reduction in premiums to those who drive responsibly." He says the same technology can also be used to help to prevent insurance fraud - which according to recent estimates by Santam, costs the industry between R2 - R4bn each year. "Accident reconstruction technology now enables one to see detailed analysis of the last 100 minutes of a trip prior to an accident, up to and including impact. This technology is so accurate that it often serves as evidence in legal cases. "For individuals who face having a claim repudiated on the basis that an accident is believed to be their fault this technology is critical in proving their case." "Likewise, for insurers who are often forced to pay out on fraudulent claims, the technology can also be used to strengthen their case, which should eventually translate into lower premiums for the rest of their client base."

 


Thursday, March 08, 2012

Time to Dollarise Malawi....

Our Malawi local currency stands no chance in the globalised set up. An excursion outside our borders is proof enough, no one seems interested in the Malawi Kwacha unless they are coming to Malawi. Our currency's journey so far seems to be on persistent nose-dive value-wise in relation to say the US Dollar or British Pound; on the basis of that I understand the reluctance to devalue as per the GOM plc current stand-off with the IMF. Time to "Dollarise" Malawi......time to go back to the Bretton Woods Institution "approved" currencies :-(.

Considerable depreciation in value of the Malawi currency unit the Kwacha from its originally very strong one Malawi Pound/Kwacha to one British Pound exchange rate in 1971 under the British Pound Sterling/Malawi pound par value system of 1965-1973......... the local currency‟s devaluation continued via a number of exchange rate value systems; (a) Peg to weighted Basket of British Pound and the US dollar (1973-1975), (b) The Peg to the IMF SDR (1975-1984), (c) Peg to the Weighted-Basket of Seven Currencies (1984-1994), and finally the (d) Floatation of the Malawi kwacha (February, 1994) (Reserve Bank of Malawi [Online], Evolution of Exchange Rate Determination in Malawi: Past and Present, Available at:
http://www.rbm.mw/general_info/index.asp?suburl=currhistory