Insurers in South Africa have started to take into account a vehicle’s power-to-weight (PTW) ratio to determine monthly insurance premiums.
Ismail Canfield from insurance advisors Ctrl recently revealed that the PTW ratio is generally considered by newer insurance companies that have more up-to-date pricing models than their well-established rivals.
Canfield noted that while older insurers still factor in elements such as car colour when calculating insurance fees, newer providers have started to make provisions for other, more relevant aspects.
“The newer methodology would look more at factors like the driver’s age… vehicle make and model, claims history, and even lately they will use a body-to-power ratio of the vehicle in order to determine the premium,” Canfield told 702.
TopAuto subsequently got in touch with one of the country’s most prominent new insurers, Naked Insurance, to find out to what extent the PTW ratio really affects your premium.
Don’t wave goodbye to that shiny sports car just yet
Naked co-founder Sumarie Greybe confirmed that the company does, in fact, take into consideration a car’s PTW ratio when setting its prices.
“The power-to-weight ratio reflects how much power a vehicle produces relative to its weight,” she said.
“This may indicate how the vehicle will perform on the road, which in turn affects its risk profile.”
Generally speaking, a higher PTW ratio means a vehicle can produce substantial power and therefore accelerate quickly, or achieve a high speed, which can create a dangerous scenario on the roads.
“A vehicle with a higher power-to-weight ratio may thus be regarded as having a higher likelihood of being involved in an accident and therefore command a higher insurance premium,” said Greybe.
A car with a lower ratio has less potential for rampant acceleration and excessive top speeds, which in the eyes of the insurer, means it’s less risky to cover.
Fortunately, it doesn’t mean you have to shy away from that shiny sports car completely.
Greybe said the PTW ratio is only one of the factors Naked considers, but its effect on a monthly premium is “typically moderate.”
Other elements that play a more significant role include:
- Type of car
- Age of the driver
- Your claims history
- Driving history (how long have you had your licence)
- Areas you drive in (theft risk, quality of roads, riskiness of other drivers)
- Your credit score (which serves as a proxy for predicting other behaviours)
“Every insurer has unique rules and levels of sophistication for pricing risk,” noted the expert.
These models are continually evolving, especially with the advent of artificial intelligence.
“An exciting development is how artificial intelligence and automated systems are enabling insurers to become more precise and sophisticated in assessing how different factors affect your risk profile, ensuring that you get charged a fairer and more accurate premium,” Greybe concluded.
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