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Why is my premium so expensive?
The premium pool must have sufficient funds to meet claims that arise and also the insurer’s operational expenses and profit requirements. Premiums are calculated according to the number of claims and their quantum amount. When claims increase in the market, premiums also increase.
Premium also depends on the number of policyholders sharing that particular risk. The more “popular” a type of insurance, the “cheaper” its premium will be. Needless to say, if there is a higher probablity of a claim occurring, the premium will be higher.
Insurers also need to purchase re-insurance to cover those risks that exceed their projection.
What most people do not realise is that a large percentage (>45%) of the premium paid on some insurance are actually tax, duties and levies paid to State and Federal government.
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