Why Do Insurance Premiums Increase Every Year?

Insurance — it’s something that we all need, and the process seems simple. You pay a monthly premium and your insurer will pay out the value of your insured goods if something happens to them, like theft. It sounds simple, doesn’t it?

However, there’s one part you might not be aware of: around your policy anniversary, your premium will most likely increase. You might be wondering:

• What determines an increase?
• Why does it go up if I haven’t claimed?

Let’s walk through the factors so you know exactly what to expect.

Key Takeaways (Quick Overview)

• Insurance premiums often increase annually due to inflation, rising repair costs, and Consumer Price Index (CPI) changes.

• Home contents, buildings, and all-risk items increase because the cost to repair or replace them rises each year.

• Even if you haven’t claimed, your premium may increase due to factors outside your control (inflation, parts pricing, risk models).

• Claims history—especially multiple claims—can impact your premium or even your policy status.

• Vehicle premiums are driven more by repair costs than depreciation.

• Planning ahead, reviewing your cover, and claiming wisely can help manage annual increases.

Increases on home contents, building and all risk items

If you were to turn your house upside down, everything that fell out would be classified as home contents.
Buildings cover the structure of your home, while all-risk items include things you take out of the house, such as laptops, cell phones, jewellery, and reading glasses.

Increases in these areas are not technically premium increases — they are driven by the Consumer Price Index (CPI). Because of inflation, these items will cost more to repair or replace a year later, and insurers must increase your sum insured accordingly.

Important reminder:

When your sum insured increases, your cover value increases too.
For example: if your building premium increases by 5%, your insured value also increases by 5%.

This protects you from being underinsured, which is one of the biggest risks homeowners face.

Claiming

When your policy is reviewed, your insurer will check whether you’ve made any claims during the past year. They will look at:

• Claim severity (how big the claim was)
• Claim frequency (how often you claim)

This can lead to an increased premium for the same amount of cover. If a customer becomes a multi-claimant, the insurer may be paying out more in claims than they receive in premiums, which can even lead to cancellation in extreme cases.

Always think twice before claiming for small losses, as they can influence your premium or policy in the long run.

Vehicle Depreciation

You may think that because your vehicle’s value depreciates every year, your premium should decrease too. Unfortunately, that’s not quite how it works.

While depreciation is considered, it’s not the main factor. Most vehicle claims are accident-related, not theft or write-offs. Because of this, the biggest driver of vehicle premiums is the cost of repair, and these costs rise due to:

• Inflation
• Increasing labour charges
• Rising vehicle part prices
• Fluctuating exchange rates

Even with no claims, premiums typically increase to keep up with rising repair costs.

Planning for the Renewal

Based on factors like CPI, inflation, claims, and vehicle parts pricing, your premium will almost always adjust at renewal. Knowing why it increases helps you plan better.

Ways to prepare:

• Think twice before claiming for small items.
• Keep a little extra aside for your annual premium adjustment.
• Review your cover to make sure you’re not over- or underinsured.
• Ask your broker to help you compare and optimise your policy.

Premium increases are part of the insurance landscape — but how you manage your policy and plan for them can make a big difference.

Need help comparing or adjusting your cover?

Get in touch with us for Car Insurance or Vehicle Tracking Quotes.
We’ll help you make sense of your renewal and ensure you’re getting the best value.

FAQs: Insurance Premium Increases (South Africa)

1. Why does my insurance go up even if I haven’t claimed?

Because premiums are linked to inflation, CPI, repair costs, and updated risk models — factors that affect all policyholders, not just claimants.

2. How much do insurance premiums typically increase each year?

Most insurers follow CPI and inflation trends, usually between 5–10%, but it varies by product and risk profile.

3. Does claiming automatically increase my premium?

Not always. But frequent or high-value claims can trigger a premium adjustment at renewal.

4. Why do buildings and home contents premiums increase yearly?

Because the cost of replacing, rebuilding, or repairing increases with inflation. Your cover increases to ensure you’re not underinsured.

5. Why do vehicle premiums rise if my car is worth less?

Because the cost of repairing the vehicle increases each year — parts, labour, and exchange rates all play a major role.

6. Can I avoid a premium increase?

You can’t avoid inflation-based increases, but you can manage your policy better by reducing unnecessary claims and reviewing your cover regularly.

7. Who can help me review or compare my policy?

A reputable broker like Quality Quote can help you understand your premium, compare insurers, and optimise your cover.