Cost benefits

Here’s a funny thing about car insurance.

When is your car worth the most? When you first buy it. With every kilometre you drive, your car’s value decreases. And unless you are lucky to have a pristine 1966 Aston Martin DB6 coupe or Ferrari 250 GTO in your garage, with every year that passes your car is edging closer and closer to the scrap yard.

Don’t get me wrong. Your new Kia Picanto or Mercedes C250 or Ford Figo are all great cars that will serve you well and be a pleasure to drive. But like most things we buy, they depreciate in value with time and use.


Now, when are your insurance premiums the lowest?  It should be obvious: logically speaking, the less your car is worth, the less you should be paying for insurance. But what really happens is that with inflation and obscure actuarial calculations that none of us can understand, premiums will often increase as your vehicle loses value. So as time marches on, your asset (i.e. your car) is worth less and less while you pay more and more: effectively you’re paying more for less.

Getting a fair deal

What’s the simplest way to ensure your monthly car insurance payments reflect the real value of your insured assets?

This is often less simple than it should be. Some insurers will do an annual review on your policy, which can help. The problem is, the review is based on many factors above and beyond the value of your car, and there’s nothing you can do about it. If they don’t give you a fair evaluation, your only hope is to try and switch to a cheaper policy.

Not everyone thinks this is reasonable. Gideon Galloway, the CEO of King Price insurance, pulled no punches when he told financial journal MoneyWeb that “I think it’s an easy excuse for CEOs and board members to blame exchange rates, interest rates, insurance cycles and bad weather, because these are all out of their control.”

So what does Galloway propose? “We take all of those elements into account, but still decrease your premium monthly,” he explained.

In other words, whatever the rates of inflation and weather patterns and the price of iron ore futures and crime levels, a King Price car insurance premium decreases each month.

What’s the catch? Do the premiums start off really expensive and gradually become more affordable? Actually not: King Price offers a budget insurance premium that gets cheaper month-by-month.

So what’s in it for King Price? The model seems to be based on the idea that if your car insurance premium fairly reflects your vehicle’s value, you won’t need to switch insurance companies. I have no idea if this is a profitable business strategy, but it sure is shaking up the competitiveness of the South African car insurance market.

How much will you save by insuring your car with King Price? Do your research and find out!