Why your premium might change each year, and what you can do about it.
Renewal season. That time of year when an email lands in your inbox, you spot a number that’s slightly different to last month’s, and suddenly you’re Googling insurance jargon at 9 pm.
Sound familiar? You’re not alone.
The good news is that renewals are actually pretty straightforward once you know what’s going on behind the scenes. We’ll walk you through why premiums sometimes change, what’s driving it across car insurance and home policies, and a few simple things you can do to make sure you’re always paying the best premium for your profile.
How do renewals generally work?
Why has my premium changed if I haven't claimed?
You open your renewal email and see that your premium has changed. But you haven’t claimed. So why has your price gone up?
It’s because whether you claimed is only one part of how your premium is worked out.
At its core, insurance pricing is about predicting the future cost of claims. To do that, insurers look at two things: how likely you are to claim, and how much it would cost if you did.
Once a year, just before your policy anniversary, your insurer updates that calculation using the latest information available: things like repair costs, claims trends, and any changes to your personal risk profile. What comes out the other side is your premium for the year ahead.
So, while not claiming does count in your favour, it’s only one input into the overall calculation. If your premium has still nudged up, it’s usually due to broader cost increases, like parts, labour, paint and other claims-related costs. We unpack that a bit more below.
So what is my premium actually based on?
Your premium is based on the claims cost expected for your risk profile, in other words, how likely you are to claim and how much a claim like yours is likely to cost. Insurance works by pooling everyone’s premiums into one pot that pays for claims, and your premium is your contribution to that pot. So when the expected cost of your claims goes up, premiums can too.
For car insurance, close to 60% of your premium goes toward repairs. That means your premium is less about what your car would cost to replace and more about what it will cost to fix. Parts, labour and paint all have a big impact on claims costs, and those costs tend to rise over time with inflation – sometimes faster, especially when imported parts are involved and the Rand is weaker. Modern cars also have more sensors, cameras and electronics, which makes repairs more expensive than they used to be.
For home contents insurance and building insurance, most of your premium goes towards the cost of rebuilding or replacing what’s been lost or destroyed. Rebuild costs for buildings have climbed steadily. Materials, labour, and contractor rates all factor in. For contents and single item insurance, it’s about what things cost to replace today, which is rarely what you paid for them a few years ago.
Why did my excess go up at the same time as my premium?
Seeing both change at the same time can feel confusing. Here’s the logic behind it.
Your excess is the amount you pay when you claim, before your insurer pays the rest. As claims get more expensive over time, the excess is sometimes adjusted so that both you and your insurer keep contributing at a similar level. That helps reduce the pressure for bigger premium increases.
Here’s a simple way to think about it. If the average claim used to cost around R10,000 and your excess was R2,000, you’d cover R2,000 and your insurer would pick up the remaining R8,000. Now, imagine claim costs have crept up to R15,000. If your excess stays the same, the insurer’s share jumps from R8,000 to R13,000. That kind of shift eventually pushes premiums up quite a bit. By adjusting the excess in line with the increase in expected claims cost – so from R2,000 to R3,000 – the balance stays more stable, and the premium increase required ends up lower than it would otherwise need to be.
The silver lining: you've got direct control over your excess. If you're happy to take on a bit more risk in exchange for a lower monthly premium, you can increase your excess in the app whenever you want. And that's just one of a few levers you can pull at renewal.
What can I actually do to lower my premium right now?
Renewal time is a useful moment to make sure your cover is pulling its weight.
One of the quickest ways to lower your premium is usually to increase your excess. Bumping it up lowers your monthly premium – just make sure it’s an amount you’d be okay paying if you needed to claim tomorrow. No point saving R50 a month if you’d be caught short when it matters.
It’s also worth having a quick look at what you’re actually covered for. Over time, people often end up paying for things they no longer own or extras they’ve completely forgotten about. A bit of a tidy-up can make a surprisingly big difference.
For home, contents and single item cover: the big one is your insured values. If you’ve picked up new furniture, appliances or gadgets recently, check that your cover still reflects what it would actually cost to replace them. And if you’ve got items on your policy you no longer own, removing them is an easy saving.
Here’s our honest answer: if we were able to give you a discount after increasing your premium, it would mean the original price was not really our best price. And that’s not how we want to operate. We want to offer you the best price we can from the start.
A lot of insurers bake extra margin into their pricing so they’ve got something to offer when a customer pushes back. We don’t do that. We work out the most accurate price we can upfront, based on the latest risk data, and that’s the price you see from day one. No games, no hidden buffers, no need to haggle.
Because you can cancel directly in the app whenever you like, we have to make sure the price we offer is already a fair one. We can't rely on winning you back with discounts later. That’s why we aim to give you our best price upfront.
Car insurance
My car is older and worth less – so why is my premium going up?
This one comes up a lot, and honestly, it’s a fair point. Cars lose value over time. So shouldn’t insurance get cheaper?
Here’s the thing: most claims aren’t write-offs. They’re repairs. So, the majority of your premium is based on what it costs to repair your car, not what you could sell it for. And the cost of fixing a car keeps going up regardless of its age. Parts are pricier, labour costs more, and even older vehicles often have technology that makes repairs more complicated than you’d expect. Many parts have to be imported, which means a weaker Rand pushes costs up too.
So while your car might be worth less on the open market, the bill to fix it after an accident could actually be higher than it was a few years ago. And remember, many claims result in repairs rather than the car being declared a write-off. We explain how that works in our guide to when a car is considered written off.
Why do things like potholes or crime affect what I pay?
Some South Africa-specific realities affect insurance premiums. Traffic lights that don’t always work, roads that have taken a real beating in recent years, and weather events like hailstorms that can generate hundreds of claims overnight. These aren’t things any of us can control, but they’re part of the risk environment we’re all driving in, and they feed into how premiums are priced for everyone in an area.
Crime trends matter here too. Vehicle theft and smash-and-grab incidents are more common with certain cars and in certain areas, so where you park and drive can affect your risk profile and your insurance premium.
The main driver of your building insurance premium is rebuild costs – what it would actually cost to reconstruct your home from scratch if it were seriously damaged or destroyed. That figure has climbed steadily in recent years. Materials, labour and contractor rates have all gone up, and rebuild inflation tends to run ahead of general CPI.
To make sure you’re not left short, Naked automatically increases your building’s value each year to keep pace with those rising costs. That adjustment is part of what you see in your renewal premium – it’s not a change you need to make yourself, but it is reflected in what you pay.
Why has my home contents premium gone up?
Contents premiums are driven by the cost of replacing what’s inside your home. Appliances, furniture, electronics – these all cost more to replace than they did a few years ago, and your cover needs to reflect today’s prices, not what you paid originally.
Crime trends in your area play a role too. Theft and break-ins affect how risk is priced for everyone in similar areas, and if those trends have shifted, your premium will reflect it.
Why has my single item premium gone up?
Single item premiums are based on two things: what it would cost to replace the item today, and how often similar items get lost, stolen or damaged.
Replacement costs for things like jewellery, laptops, cameras and bicycles tend to creep up over time – and for imported items, a weaker Rand can push that up faster. On the claims side, certain items are lost or stolen more frequently than others, and if that pattern has shifted for your type of item, it feeds into your premium.
It’s worth checking that the insured value on your single items still reflects what they’d actually cost to replace. If it’s been a few years since you specified the value, it may be worth updating.
A quick renewal sense check
When your renewal arrives, a few minutes of review can go a long way. Here’s what’s worth checking:
Are my insured values still accurate? For home, contents and single items, check that what you’re covered for reflects what things would actually cost to replace today. Naked recommends reviewing this once a year.
For car insurance, are my details still correct? Where I park overnight, how far I drive to work, and whether my circumstances have changed can all affect my rate.
Do I still need all the extras on my policy, or are there things I’m paying for that I no longer use?
If I’ve had a recent claim, its impact on my premium will reduce over time as I stay claim-free. Staying covered and claim-free is the most reliable way to bring costs down over the long term.
Insurance isn’t the most exciting thing to think about. But once a year, it’s genuinely worth five minutes of your attention. Future you – the one who just had a bump in a car park, or came home to a broken window – will be glad you did.
Courtney Wicksteed is Content and Communications Lead at Naked Insurance. Since 2019, she has led the brand's content, SEO, and communications function, with a focus on making insurance clearer and more useful for everyday South Africans.
