Outsurance

[Phil Cooper]

You need to purchase some short term insurance.

It may be for a single item, such as a motor car, or a full domestic package consisting of buildings, contents, portable items which are taken off your premises, and motor vehicles.

It may be that of your business, or a business for which you are responsible for placing the insurance covers.

Decision one is where to buy your covers. Until around a decade ago, this was a simple decision: you looked up the details of an insurance broker in your telephone directory. However, in the interim period, the Direct Insurer has started operating aggressively in the South African Insurance market. Initially, these only applied to domestic insurance products, but in the last year or so they have expanded into the commercial business market, generally aiming at the smaller commercial client.

So, your first choice is whether to go via a Direct Insurer, or via a Broker. Let us now discuss these options.

DIRECT MARKET VERSUS CONVENTIONAL MARKET

The Direct Insurers originally based all the advertising campaigns on the cost element. Their advertisements would claim that if you used them, you would be able to "save the Brokers' fees and commissions – as much as 25%".

How realistic is this claim? Totally unrealistic. Pure advertising “blurb”.

All insurers have costs. They generally try to limit claims to a maximum of 65% of their premiums, with the remaining 35% comprising admininstration fees, commissions (conventional insurers) or administration fees (Direct insurers). So, with a direct insurer, 15% of your premiums go for telesales staff, advertising, and similar fixed costs, while 15% of your premiums to a conventional Insurer get paid to your Broker - whose job it is to get you the best deal and maximise your claim! Where is the difference? 25% saving? HOW???

Do you look for the cheapest car? Do you look for the cheapest watch or jewellery? Do you live in the cheapest area? No? Then why look for the cheapest insurance to cover your hard-earned assets? Remember - in ALL things you get what you pay for!

CLAIMS

How does a Broker keep a client happy?

When their client has a claim, they ensure that the claim is paid speedily and to the maximum amount possible. The Broker then has a happy client, retains him, and makes better profits.

How does an Insurer make profits? I would venture that this is by minimising their claim payment in terms of the policy conditions.

Also - bear in mind that Insurance is NOT just Insurance!

If you want to buy a car, you look at the benefits that the car offers that you wish to purchase. You don't say "I'm going to spend R60,000 on a new car” - then buy one, and find that you do not have air conditioning, power steering, or leather seats. You know that you will not get those features for that kind of value. Then, why do you buy insurance on the same assumptions?

When you ask for motor insurance quotations, and seven Insurers quote between R1,000 and R1,200 a month, and one comes in at R500, why do you not ask yourself: am I getting like-for-like covers? If you read the small print you may find there are much higher excesses, certain covers are excluded that other Insurers give in their policies, there are restrictions not contained in the more expensive Insurers' wordings, etc.

A colleague did a technical comparison between the Multimark 3 policy wording - used by the vast majority of conventional Insurers, and the commercial policy offered by Outsurance. There are numerous instances where the Outsurance cover provides more restrictive covers - I can forward a copy to anyone who is interested in reading a lot of techical jargon.

The policy covers given by the "Conventional" Insurers are designed in conjunction with Brokers. Brokers would like their clients to enjoy the widest possible covers - Insurers would like covers as limited as reasonably possible. The result is a compromise.

Direct Insurers have no "counter balances" - so the covers provided are, frequently, more restricted than that of the conventional Insurers. (I did a comparison of covers a couple of years back, and found that one of the Direct Insurers did not cover damage to Buildings or Contents caused by falling trees.... Most Insurers cover tree damage "except when being felled...." The trouble is, most people only discover this type of restriction when the tree is already lying in their lounge.

Another point to consider - are you prepared to REALLY study your policy wording in the event of a claim so you understand the technicalities? A subscriber on another web site to which I subscribe was told by his Direct Insurer that damage caused by his trailer to another vehicle while he was towing it was not covered, "as the trailer was not insured on his policy". He accepted their declinature - until I pointed out to him that most Insurers cover trailers attached to an insured vehicle whilst being towed.
He re-approached them, and was again advised that this was not covered. Then I obtained a copy of the said Insurer’s wording, and I pointed out to the claimant the clause in the policy that provided Third Party damage cover to trailers being towed by the Insured vehicle. The Insurers subsequently admitted that they had made an error, but then tried to invoke the late notification clause in refusing to pay the claim.

Another point to consider is that a good broker knows the market, and which Insurer offers the most cost-effective covers for your needs. And, when the renewal comes around, he will be able to advise you if the terms are in line with the rest of the market, or if you should consider a change of Insurer. With a Direct Insurer, or a Broker with only one market represented, you take what you are offered. And, if they were cheap 12 months ago it does not mean that they still offer the cost-effective covers of a year ago!

Another point. Before you finally choose your Insurer, take five minutes and have a look at your Insurer on www.hellopeter.com, and the comments made in favour, or against, the Insurer you are considering using. It is easy enough: go to the website, insert the name of the Insurer you are considering in the Quicksearch box, click GO - then read all about it...

Consider the ratios of compliments versus complaints. Compare that to the numbers of complaints lodged against the conventional, broker-driven insurance markets. If you consider that the non-Direct Insurers who insure +- 80% of the market only get around 17% of the complaints - meaning the 20% Direct market get 83% - 'nuff said! (On 20th May there were 1,593 complaints against the Direct insurers, and only 283 against the conventional insurers on the website above.)

Did you ever read the three articles regarding the claims settlement attitude of Outsurance in Noseweek magazine? No? The can be frightening!

Before buying motor insurance, phone some panelbeaters at random to ask them which Insurers they do NOT want to deal with, and why? It makes interesting listening when you hear tales of pirate or second-hand parts, delays, etc. Do you want your car to sit in a panelbeater's for four to six weeks, while they try to source second-hand parts, while your Insurer will not allow them to use new parts because they are too expensive?

A Broker's duty is to ensure your covers are correct for your particular needs, are cost-effective, and will ensure that, when you have a claim, you receive the best possible settlement. He does a lot of the legwork you are forced to do for yourself with a Direct Insurer. Not every insurance policy is the same, and they can be adapted to meet your particular needs. The broker has the expertise to do this for you: why limit your choices by going to only one Insurer?

Also - phone a Direct Insurer - you get one quote, on one Product. Speak to a GOOD Broker, and you may find he gets comparisons between as many as 15 Insurers, or more. Also, the days where ALL the Insurance should go into one basket are over. Often, particularly with high-value vehicles, you get wider and cheaper cover placing the car with one Insurer, and the Contents and All Risks with another. A Broker will advise you!

Judge for yourself!