Determinants of Motor Insurance Purchase in Lagos - Paper Example

There have been some car accidents reported in Lagos, and the cost of purchasing insurance policies has also increased. The number of people who buy motors in Lagos increases at the end of each year, and that has caught the attention of many researchers. From a survey which economic researchers conducted in the year 2015, it was evident that insurance companies put little effort when it comes to covering vehicles (Hamadu & Tajudeen 2012, p.103). The reason why most people have not been insuring their cars is the fact that it is not compulsory and the idea of protecting their vehicles is not appealing. Agencies and organizations appointed by the government have now found out the importance of motor insurance purchase, and hence they have incorporated it in gender, education, income, legal status, multiple policies, and service delivery. In this essay, there will be the illustration of the determinants of motor insurance purchase in the city of Lagos.

The driving record of an individual is one of the factors determines motor insurance purchase in Lagos. One who has a better driving record will pay lower premiums on insurance. Some drivers are known to be reckless, and they have had frequent accidents. Such drivers are supposed to pay higher premiums as they are likely to cause accidents. The Lagos law on motor insurance purchase holds that one who has had previous cases of traffic violations is supposed to pay more while paying the premiums (Hamadu & Tajudeen 2012, p.113). A new driver is also likely to spend more on the premiums especially when he or she has stayed for long without covering the vehicles or has not experience in driving. In that case, one needs to maintain a clean driving record in motor insurance purchase.

The number of times that one uses a car is the other determinant of motor insurance purchase in Lagos. People who drive their vehicles for long distance or for more time are supposed to pay highly while buying the insurance. For instance, public service vehicles that transport people in the entire city of Lagos pay more when purchasing the insurance premiums. On the other hand, individuals who drive their cars in sporadic cases or for "pleasure" are supposed to pay less. The agencies typically check the speedometer and the distance that one covers in an hour to be able to calculate the appropriate amount to allocate for the purchase of motor insurance (Esho et al., 2004, p.265). Therefore, one needs to make a decision based on the distance that he or she intends to cover at a given time.

The parking place and the residential area also determines the motor insurance purchase in Lagos. The cost of insurance can be affected by the location where one lives and the parking places of the vehicle. Some areas have high cases of vehicle vandalism, accidents, and thefts. For instance, many urban centers are insecure and have reported many cases of vehicles thefts and carjacking. People who own vehicles and live in such places will have pay more insurance premiums as it is also compulsory for them to do so (Hamadu & Tajudeen 2012, p.110). There are other factors such as frequency of litigation, car repair costs, medical care and weather trends that also needs one to make critical decisions while going for motor insurance. In that case, one needs to analyze the parking areas and residential areas to determine the rates that one will pay while purchasing the automobile insurance.

Lagos rules on motor insurance purchase consider age and gender of the drivers. There is a perception that matures and grown up drivers cause fewer accidents as compared to teenagers. Therefore, the insurance agencies in Lagos charge highly for people who are below the age of 25 (Esho et al., 2004, p.270). Gender is the other determinant of motor insurance purchase. There is also a perception that women cause fewer accidents as compared to their male counterparts. With all others kept constant, women pay less on the insurance premiums. The individual driving history will also accompany the gender in this case as there are women who have had a history of causing many accidents and going against the traffic rules. Therefore, gender is necessary and an essential factor while purchasing motor insurance.

The type and model of car that one drive is the other determinant of motor insurance purchase in Lagos. There are car models that will cost more to insure depending on the design and the method used while manufacturing them. In that case, there are variables that the insurance agencies have to check while covering such vehicles. For instance, the likelihood of people stealing the car, the cost of repairing the damaged parts, and the safety record are some of the variables that are put into consideration while covering motors. The size of the engine is the other factor that determines the insurance premium in connection with the model of the vehicles. Insurance premium discounts are only available for vehicles that have high-quality safety tools (Hamadu & Tajudeen 2012, p.111). The insurers in Lagos not only look at the safety of the people who travel in the vehicle but they also check for the damage that the car might cause on other vehicles in case of an accident.

The credit base of an individual also determines the motor insurance purchase in Lagos. Most motor insurance agencies check the credit base of drivers before allocating the premiums to them. They believe that the credit base is the best way to determine whether one will file a claim when an accident occurs or not. The credit base of a driver depends on payment history, collections rates, credit history length, outstanding debt and bankruptcies (Esho et al., 2004, p.276). For instance, those who regularly pay their loans and have on-time credit cards will score positively and hence they will get low premium rates. On the other hand, those who make late payments and default their payments will score negatively, and hence the insurance premiums that they pay are higher. Therefore, one needs to have a clean record when it comes to credit base.

In conclusion, there are some determinants of motor insurance purchase in Lagos. Before one settles for the acquisition, it is advisable to opt for a premium or rate that will be beneficial to the driver himself and the vehicle. It is important to go for add-on covers as they act as additional policies that one gets while renewing the existing one. Insurance agents are the best advisors while going for a motor insurance as they avail ways of getting the best suiting plan at a low premium amount. The type of vehicle, parking location, gender, distance traveled, and personal factors are key when going for a motor insurance in Lagos. All in all, the law needs one to adhere to each determinant and the insurance premium put in place. That way, covering a vehicle becomes cheap, faster and a useful process that each car owner has to undertake compulsorily.

References.

Esho, N., Kirievsky, A., Ward, D. and Zurbruegg, R., 2004. Law and Determinants of Property-Casualty Insurance. Journal of Risk and Insurance. 71(2), pp.265-283

Hamadu, D and Tajudeen, O. 2012. Determinants of Motor Insturance Consumers Buying Decisions in Nigeria. International Journal of Academic Research. Vol. 4 Issue 6, p103-116.