Insurance on wheels
Buying an car insurance can be time-consuming and confusing because of the number of choices one must face.
Some people end up paying either too much or too little in premiums.
There are many factors that affect the premiums - the type of car you own, your personal background (such as age and driving history), the discount you can get from the insurance broker, and the insurer you choose.
Consultants and insurance brokers say that, generally, high performance cars - such as Porches and Ferraris - and some Japanese brands that are high on the list for car thieves, as well as high accident-risk cars, tend to face higher premiums, and insurers are less willing to insure such cars.
'Honda is one of the types that is high on the car thieves' preference list, and some types of vehicle are known to have a high accident rate. Due to these reasons, such car owners might have to end up paying a higher premium,' said Paul Law Siu-hunt, a consultant at the Professional Insurance Brokers Association (Piba) and chairman of Qualifirst Insurance Brokers.
Young drivers and those with accident records can also face difficulties.
'They [insurers] are very reluctant to take on high-risk cars and drivers who have had an accident,' said Neil Raymond, managing director at Kwiksure.com, a subsidiary of Pacific Prime Insurance Brokers.
Simon Brown, the owner of a Porsche Carrera 911, has encountered difficulties in getting insurance for his car. Mr Brown, who is a chartered surveyor at an international construction consulting company, bought his 1990 Porsche 911 a few months ago. After he was given an exorbitant insurance quote by the dealer from whom he bought the car he decided to look elsewhere. He approached American International Underwriters (AIU), the insurer of his car in Britain, but they turned him down.
'I spoke to them over the phone but they would not insure me because it was a high-performance car and I have a claim record,' said Mr Brown.
According to Mr Brown, more than six insurers rejected his application.
Eventually, he went on to the Internet and, through an Internet broker, bought the insurance coverage he required for about HK$13,000 per annum from Trinity General Insurance - cheaper by more than HK$4,000 than the previous insurer's quote.
Mr Brown said that since he was an expatriate, he or his broker had to arrange for the transfer of his driving records from overseas.
Generally, the annual premium decreases by 15 per cent each year if no accident occurs, but other costs can increase. For owners who want to renew their policies annually, Mr Raymond advises continued comparisons between brokers, even though the calculations of the new premiums may be complex.
'Some intermediaries tend to give very high discount or even maximum discount on their commission in the first year in order to clinch the deal, but would greatly reduce the discount in the subsequent years. They are aware that consumers usually go back to the same insurer,' he said.
According to brokers, the general discounts that they give are about 30 per cent and the broker's commission would be 15 per cent.
The total premium includes a fixed premium, a rate based on the cost of the car, a 2 per cent Motor Insurer Board tax and a loading cost.
One way to reduce motor insurance costs is to negotiate over the excess, the amount of money that the insured person is liable for in case of damage to the vehicle. However, generally, the excess is stipulated by the insurer and the individual might find it hard to bargain unless he uses an experienced intermediary.
Loading is another additional cost that can be avoided by shopping around. It is the rate added on to the base premium based on risk factors such as the type and age of the car. Since insurers assess these factors differently, loading varies greatly among the insurers.
'For a performance car, it is quite common for insurers to put a loading but a typical family car would not be subject to it,' said Mr Raymond.
Gathering information from friends, insurance brokers and the Internet are ways to obtain a car insurance at a more competitive price.
Brokers also can be effective given the established relationships they have with insurers.
'Each insurer has its own preference for the types of customers and tolerance for risk,' said Mr Law.
This year, consumers may face higher motor premiums and more difficulties in obtaining cheaper motor insurance as insurers are more conservative due to a high claims record last year, according to insurance brokers.
'Insurers are very nervous about new business in general,' said Mr Raymond. 'AIU has basically refused to take on any new business this year unless the person has an excellent driving history. Of course those who have a six-year no-claim record and are still with the same insurer will have no problems.'
'Because last year's claim record is high, insurers are considering additional factors and are changing their policies,' said Mr Law.