Think Insurers Are Overcharging You? Here’s What Really Happens to Your Premium

Many transporters believe they are overpaying for insurance, but few actually understand where their money goes. I want to break down exactly what happens to your premium and why claims, not just insurer pricing, are the real driver of cost increases.

I want to share something that is often overlooked, how much of your premium actually stays with the insurer and how delicate the balance is between premium income and claims payouts. I have seen too many transport businesses assume that insurers are making excessive profits, but the reality is far more complex. Let me break it down for you:

For every R100 a transporter pays in insurance premiums, here is what actually happens before the insurer even starts paying claims:

1?? VAT (15%) → Goes straight to the government, not the insurer.

2?? SASRIA (+-8.5%) → Allocated to SASRIA for riot, strike, and civil unrest cover.

3?? Broker Commission (12.5%) → Paid to the broker for arranging the policy.

4?? Broker Fees (5%) → Additional admin/management fees brokers may charge.

5?? Insurer Operational Costs (5%-10%) → Covers underwriting, claims processing, admin, and compliance.

What Is Left for the Insurer?

After these deductions, the insurer is left with only 49% to 54% of the total premium to cover claims and risk exposure.

From my experience, many clients assume insurers are making massive profits, but in reality, their margin is incredibly tight, especially in high-claims industries like transport. When losses mount up, insurers are forced to adjust rates or exit the market entirely.

Why Loss Ratios Matter – Managing Risk to Control Premiums??

• An insurer must balance premium income against claims payouts carefully. While a single large claim is straightforward to factor into pricing, the real challenge comes when there are multiple smaller claims that accumulate over time.
• Insurers only have 49% to 54% of the premium left after expenses, meaning that every claim erodes their ability to remain profitable.
• A large single claim may cause an immediate spike in loss ratio, but it is repeat smaller claims that often push a policy into unprofitability.
• When multiple claims start adding up, insurers must decide whether to increase premiums or re-evaluate the risk entirely.
• Transporters who actively reduce claims frequency and severity are in a far stronger position to control their premiums over time. Investing in driver training, fleet monitoring, and preventative maintenance is not just about safety—it is a financial strategy that keeps insurers confident in your risk profile.
• Risk management is the key to sustainable, affordable insurance. Insurers do not raise premiums arbitrarily—they do so based on data, and the businesses that proactively manage risk will always secure the best terms.

?? Why Transporters Need to Understand This

Many fleet owners believe that insurers make massive profits on premiums. The reality? If claims get out of control, insurers operate at a loss.

?? This is why insurers focus on risk management.

?? This is why clients with lower claims histories get better rates.

?? This is why businesses that control their claims exposure benefit in the long run.

As someone who has worked in this industry for years, I have seen businesses completely transform their insurance costs just by focusing on risk management, driver training, and better fleet controls. The best way to lower premiums is not by demanding a discount, it is by proving that you are a lower-risk client.

What Do You Think?

?Did you know insurers actually earn so little after all these costs?

? Do you think the transport industry needs better risk management to control premiums? ? What strategies do you think are most effective in reducing claims?

Let’s discuss in the comments. ??

Umhlanga Insurance Brokers (UIB).

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