Shopping Around for Car Insurance Can Drive the Price Down

Ruti Levy
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Ruti Levy

Some 2.5 million vehicles on Israel's roads generate a thriving NIS 10 billion-a-year car insurance industry. As opposed to most other types of policies, vehicle insurance coverage is stipulated by law: Anyone owning a motorized vehicle needs to buy compulsory insurance and have it always on hand when driving.

Until 2001 the cost of compulsory insurance was fixed. Now, although regulated, its price can vary substantially. Insurance companies calculate the rate according to a set of standard parameters. These include the driver's age and gender; years of driving experience; number of accidents and times the driving license was revoked in the past three years; size of the insured vehicle's engine; and whether it's equipped with air bags.

The kids are expensive all right

The companies weigh the importance of the various factors differently in their pricing. For example, direct insurers consider the driver's gender whereas the companies operating through brokers don't; Phoenix and Menora Mivtachim don't factor in engine size; Hachshara doesn't take driving experience into consideration; and license revocations are irrelevant to AIG, Migdal, Menora Mivtachim and Shlomo Insurance.

The companies rate the parameters as they choose, producing an array of premiums for the different profiles. Comparing prices is simple and doesn't rely on asking a broker: Price lists are available online on a number of websites - including the Finance Ministry's - all drawing off the same database. A driver with a "high-risk" profile - under 24 and licensed to drive less than a year, or with a rich history of insurance claims and having his license revoked - could save hundreds of shekels by comparing.

Hundreds of shekels, however, amount to small change compared to the savings potential on optional insurance, which is where the big money in this market lies. Accounting for 56% of the industry's profits, disparities between price quotations on optional insurance could run into thousands of shekels.

Additional factors come into play here, such as the vehicle's make and its propensity to be stolen; safeguards protecting it from thieves; cost of repairs; where the insured person lives, and even on which floor of the building and where the keys are kept.

With the help of a website that provides price comparisons for insurance - wobi.co.il - we checked prices quoted by 10 companies for several driver profiles driving four popular car models: family-sized Mazda 3; mini-sized Suzuki Alto; 4x4 Hyundai Tucson; and large family-sized Ford Mondeo.

What we checked: For a Suzuki Alto, insurance on any driver over 30 and two types defined as "risky" - where one of the regular drivers had a damage claim in the previous three years; and including an 18-year-old driver on the policy.

What we found: The damage claim raised the policy premium by 16% to 27%, costing an additional NIS 500 to NIS 1,100 per year in each of the three years following the claim. When the cumulative increase of NIS 1,500 to NIS 3,300 to premiums is added to the deductible - between NIS 1,400 and NIS 2,000 in the cases we checked - we found that it doesn't pay to file an insurance claim on damage to the car costing less than NIS 5,000.

We also found that insuring a young driver usually doubles the price of the policy. Compulsory insurance ranged from NIS 3,125 at 9.000.000 to NIS 3,890 at AIG. The two direct insurers presented the opposite ends of the price spectrum for comprehensive insurance as well - NIS 3,718 at 9.000.000 and NIS 9,514 at AIG.

Price variations for full insurance, compulsory plus comprehensive, exceeded NIS 6,000 - or 88%, indicating that the insurance companies invest in different segments. Young drivers can turn price rankings inside out: 9.000.000 went from being the second most expensive company to the one offering the lowest premium. In response to an inquiry by TheMarker on this subject, AIG said it chooses to differentiate and target segments with low risk exposure, like women and parents.

Conclusion 1: A past insurance claim can raise the premium by 20%. Adding an 18-year-old driver to the policy will increase it by 130%.

Conclusion 2: Insurance companies target different segments. A company with a good price for a driver over 30 could become less enticing when adding a teenage driver to the policy.

What we checked: Compulsory and comprehensive insurance rates for three different driver profiles to estimate the price differentials between companies and various quotes from the same company - any driver over 24, any driver over 30, and two specific drivers over 30 listed on the policy.

What we found: Shlomo consistently provided the cheapest offer, on both compulsory and comprehensive policies, for all three profiles - NIS 320 to NIS 450 less than the next cheapest. Shlomo prices "any driver" identically to two specific listed drivers; the others extend coverage to any driver for as little as under NIS 100, in the case of Phoenix, and for as much as NIS 400 to NIS 500 - like AIG and Menora Mivtachim. AIG presented the three highest rates, charging up to NIS 2,700 more than Shlomo.

Conclusion: Differences between rates could reach thousands of shekels. It is therefore advisable to ask for more than two price quotes before choosing an insurance company.

What we checked: Insurance for two specifically-listed drivers over 35 on the Ford Mondeo and the Hyundai Tucson.

What we found: Most of the policies on both cars required the installation of additional safeguards. The one-time expense required to protect the Tucson changed the ranking of comparative costs between the companies. Phoenix's proposal was NIS 360 cheaper than Menora's, but after taking into account its demands for adding safeguards, Menora's offer became cheaper by NIS 540.

AIG's offer in this case was high but still quite close to the others. But the company's demands for added safeguard measures made the policy much more expensive and less attractive. The cost of installing an active tracking system required by the company was NIS 2,053 plus monthly fees of NIS 51 - adding up to NIS 612 a year.

In insuring the Mondeo, the rankings based on premiums quoted were completely switched around by expenses covering required protection devices. The lowest prices initially given by Menora and Migdal became the most uneconomical.

Conclusion: The insurance companies' safeguarding requirements could make the lowest price offered unattractive. The cost of adding required protection to the car should be checked in advance.

The insurer may require the antitheft protection as a condition for comprehensive insurance. Example includes locking devices, vehicle disabling mechanisms and tracking systems. The required safeguards are automatically covered by the policy. It is advisable to request a discount on the insurance premium for a vehicle with excess safeguards.

Insurance covering bodily harm to occupants of the vehicle insured and to pedestrians injured by the vehicle in an accident. Insurance coverage includes all medical expenses, compensation for loss of income up to three times the average national wage, and compensation for pain and suffering.

Price quotations were for a year's insurance starting December 1, 2011, for drivers living in areas not considered high-risk who haven't had their licenses revoked in the last five years and haven't had any claims for bodily injuries or property damage in the last three years, except where indicated. Prices included packages covering towing and roadside repair services, windshield replacement, radio, replacement vehicle (automatic ), and coverage providing the value of a new car in case of total loss. They also included insurance for 3rd party property damage of NIS 500,000 - except Phoenix, where the limit was NIS 1 million.

For the Suzuki and Mazda cars, no additional safeguards were required beyond those provided by the manufacturer. Where additional safeguards were required for the Ford and Hyundai cars, we checked typical market prices, and requested price quotations from Shagrir Systems and Ituran for active tracking systems.

For price quotations on compulsory and comprehensive insurance, we were assisted by the wobi.co.il website which compares data from seven companies: Shlomo, Menora Mivtachim, Hachshara, Phoenix, Shirbit Insurance, Clal Insurance and Migdal. The tables present the four cheapest quotations from this comparison. To complete the picture we got quotations through the Internet from the direct insurers: Direct Insurance and 9.000.000 - both under the same ownership - and from AIG Israel

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