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Top 50 Insurance Companies in Kenya List In Car, Health Property BestHow Motor/Car/Auto Insurance Companies Calculate Premiums

How Motor Insurance Companies Calculate Premiums

Car Insurance Basics
How Motor Insurance Companies Calculate Premiums

Motor insurance companies provide insurance to motorists based on risk modelling techniques. The fundamental question that the risk model answers is, “how likely is it that this specific customer will make a claim?” Over the years, auto insurance companies have streamlined their risk modelling techniques. The remaining task is usually to determine the risk classification of an applicant in order to arrive at the correct level of premium to charge. The main determinant factor is the value of the car. Other fundamental considerations made by insurance companies are as follows

1. Age of the Driver
The age of a driver is a strong predictor of whether a policyholder will make a claim. Younger drivers tend to be riskier customers. This may be because of their low risk threshold, and inexperience on the road. Most insurance companies are especially weary of drivers under the age of 25. Of course, not everyone under this age is a risky customer, but this age bracket is generally riskier to insure.

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2. Sex of the Driver
Some insurance companies such as CIC Insurance offer products (CIC LADY AUTO) that target women. Women tend to be more careful on the roads hence they present diminished risks to insurance providers. In addition, lady insurance products offer enhancements that fit into their lifestyles. For instance, CIC’s lady insurance offers an enhancement that covers a lady driver from the loss of her handbag. This demonstrates that your sex can determine the premiums you pay for insurance.

3. Claims History
Policyholders with a high claims history tend to attract higher premiums compared to those who have not made any claims recently. Once you make a claim from an insurance company, you lose all accruing non-claims discounts usually awarded on a year-to-year basis. Having a bad claims record can increase your premiums, while having a no claims record can reduce your premiums

4. How the Vehicle will be Used
The intended usage of your car is a critical determinant of the premiums you will pay. In general, private cars attract lower premiums compared to public service vehicles. Auto insurance companies offer cheap insurance cover to private motorists because their usage tends to have fewer risks.

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5. Availability of Antitheft Devices
The presence or absence of an antitheft device on your car can affect the premiums you will pay, and definitely affects the amount of compensation you can receive from an insurance company. In this case, fitting car alarms, immobilisers, steering locks, gear locks among others can reduce the risk profile of your car and can thereby increase your chances of getting cheap motor insurance.

6. Type of Insurance Cover Required
Finally, the type of cover you need plays a significant role in determining the amount of premiums you pay. Comprehensive covers attract the highest premiums because it insures you against a wide range of risks. Third party, fire, and theft policy is cheaper than comprehensive car insurance but the cover does not protect you from accidental damage. Third party cover only protects you from liabilities arising from third parties affected by an accident involving your car.



These are the key considerations that determine of how much premiums you should pay to your motor insurance company. You may also use car insurance calculator kenya for determining the premium estimates.