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Thread: Insurance: Evil necessity or rip off?

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    Bronze Member Sieg's Avatar
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    Insurance: Evil necessity or rip off?

    Do we really need insurance?

    Why I don't trust insurance companies

    Case 1:

    Back in the sixties, my father took out a policy with Norwich which was supposed to pay my mother some R300 per year for life on my father’s death. My father died in 1974. My mother received payments for some years, but then these stopped. I found out that Norwich UK had left South Africa and their SA operations had been hived off to Fedsure. I had to threaten Fedsure with legal action and eventually they paid, backdated for the years they had not paid, with interest. Then payments again ceased. I investigated and found out the Fedsure had ceased to exist, some policies had been taken over by Metropolitan or whatever, then the assets had been transferred to Investec and finally ended up with Liberty (what a mess!), who don’t respond and are not paying. My mother is 77 years old, has medical problems and can sure use the money to pay for the eye injections she needs every three months to prevent blindness. Liberty just ignore my letters, faxes, e mails and telephone calls.


    Case 2:

    In 1992, I took out educational policies with Sanlam for my two daughters, to pay out when they reach 18 in order to fund, or at least partially fund, their tertiary education. When my eldest turned 18, payment was made with little fuss. It was very different when my youngest turned 18. She was by then living in the UK with her mother. Sanlam refused to pay out to me as instructed by my daughter (so that I in turn could pay out the funds to her UK bank account, exactly as was done with my eldest). Sanlam would not deal with me at all. They said I was merely the “payer”. Their broker, now manager of the East London branch, one Taylor, tried to fobb me off by saying I was not understanding how insurance worked. I was just the payer and not the policy holder. Yes, the policy was in the name of my daughter’s mother, my ex-wife (who had ceded the proceeds of the policy to my daughter). But I had paid the premiums all the years, it was so stated in the divorce order, I was the father and therefor a guardian and I also had a Power of Attorney to represent her. Still Sanlam refused. Many months later, they had not paid out. This caused a final rift in the relationship between my daughter and I. I still do not know if they ever paid out in terms of that policy to my daughter.


    Case 3:

    My bakkie was insured through Santam. I lent it to an employee’s son to assist with his house move and he had an accident. I have a friend who is a panelbeater. I asked my broker if this friend could to do work. He was not on the Santam panel. I understood it was not a problem. All the paperwork was done. Six months after the repairs, my panelbeater friend phoned to say he had not yet been paid. Santam were not bothered. They said they had faxed a final clearance to me to sign but they had not received this back ( I had never received it as they had sent it to a non-existent fax number). Santam had never bothered to check. Why should they - the longer they can not pay out, the better for their cash flow. To add insult to injury, they then go and pay into my banking account (more hassles for me) and not to the panelbeater. Their excuse was: “he is not on our panel!”.


    Sieg

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    Site Caretaker Dave A's Avatar
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    I'm reminded of an article I read many years ago - an interview of the then chairman of Old Mutual before it demutualised.

    Asked to comment on the "new kid on the block" Liberty Life which had already achieved significant market penetration and affected Old Mututal's client base, he said "It makes a very fine share."

    And that about sums up my opinion of the life assurance industry. I'd rather have their shares than their products.

    Insurance, I'm afraid, is an evil risk management device that I think most of us can't avoid.
    The trouble with opportunity is it normally comes dressed up as work.

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    Bronze Member Sieg's Avatar
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    Insurance: how to avoid it

    Insurance, I'm afraid, is an evil risk management device that I think most of us can't avoid.
    or are there ways to avoid insurance, Dave? [and the payments that go with it. They are quick to take the premiums each month but slow to pay?]

    Can we, for example, afford to self-insure?

    What about some kind of stokvel by a group of self-employed? [Isn't this how the insurance companies started?]

    Other ways?


    Sieg

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    Site Caretaker Dave A's Avatar
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    Self-insurance is an option where you have the base to cover a "claim". I know a pharmacist who kept putting money aside (invested, of course) earmarked to cover insurable elements. The idea was to have enough to cover one vehicle, then two and so on.

    The idea of an insurance "stokvel" is interesting. It's certainly how the "mutuals" started out. Of course these have now converted to companies.

    As I understand it, the hurdle to overcome nowadays that wasn't there before is legislation that demands that you can show total assets in excess of total exposure. This is very different from being able to establish and show that total income exceeds likely payouts over any period of time.

    The problem would be structuring something that could demonstrate the required asset base.
    The trouble with opportunity is it normally comes dressed up as work.

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    just me duncan drennan's Avatar
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    I (and I think quite a few people) effectively self-insure part of our medical expenses. I've got a hospital plan, and I put away a reasonable sum every month with is readily available it we need it. It is what most people are effectively doing through the so–called "medical savings account."

    I wonder if this kind of "dual insurance" could used in other situations.

    A side note on the medical stuff: I know the company that my dad works for runs their own medical savings account for all the staff (rather than paying it over to the medical aid) - I'll ask him about the regulations surrounding that.

    Quote Originally Posted by Dave A View Post
    The problem would be structuring something that could demonstrate the required asset base.
    I wonder what the client base would have to be to force you to comply to the legislation. If it is a private group (with limited membership), does it need to comply?

    I've had a very good experience with Outsurance on the short-term stuff (excellent service, and quick), but I am very wary of the life insurers.
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    Site Caretaker Dave A's Avatar
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    Bruce Cameron has a fair dip at the life assurance industry in an article from Personal Finance. Here's a sample.
    Cameron says there is a two-pronged assault that is being made on your investments.

    The first comes from scam artists such as convicted felon Jack Milne, who deceived investors by telling them that he would properly invest more than R200 million.

    People such as Milne treat the law with total contempt, lie to you, promise you the earth and threaten you when things start to go wrong.

    Unfortunately, the second line of attack comes from the formal financial services industry, which too often:
    • Interprets the law to suit itself;
    • Has poor ethical values;
    • Is driven by the self-greed of executives and the desire to make excessive profits;
    • Forgets that it is a custodian of public money and incorrectly treats your savings as its own money to do with what it may. To make matters worse, the life assurance industry is entitled to do this in terms of the law as it currently stands; and
    • Uses perversely incentivised, poorly trained financial advisers (product floggers) to sell you high-cost, inflexible products that are not in your best financial interests.

    full story from Personal Finance here
    The article goes on to point out some warning signs to look out for.
    The trouble with opportunity is it normally comes dressed up as work.

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    Platinum Member SilverNodashi's Avatar
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    The biggest problem you have, if you don't have insurance, or only self-insure, is what happens if you were to drive into someone's Merc SLC 500?

    Or you have to be hospitalised for more than 2 weeks?

    Does anyone know what it cost these days to lie in I.C.U?

    i know of someone who's been in hospital for about 3 weeks now, and their medical aid funds are depleted! Luckely they have some sponsors who can raise some extra money.

    The fact of the matter is, even though we are being ripped off by our insurance (currently pay R870 pm), and insurance (currently pay R1300 - only me & my wife, no kids yet), we can't afford to be without it.

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    Insurance in referred to as a "Grudge Purchase" by the professionals...Definitely a necessity, but way over priced if you look at insurance company profits. Prices should be regulated.

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    Gold Member Chrisjan B's Avatar
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    UPS and inverters is also a grudge purchase, it's also a form of insurance...

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    Email problem Phil Cooper's Avatar
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    You say Insurers make huge profits?

    I think you need look again: if they make 2% - 5% underwriting profit they feel they are doing well....

    Except for the Direct Insurers - THEY make around 20%+.

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