Chris Moerdyk

Insurance companies believe we are all idiots

2012-12-10 08:25

Chris Moerdyk

Hands up everyone who has received that annual letter from their car or household insurance company explaining that due to all sorts of circumstances from increases in crime to hailstorms and an outbreak of rinderpest in Somalia, insurance premiums will, sadly have to go up.

These letters are written in a way that many naive recipients will picture the insurance people reluctantly writing these letters with tears streaming down their faces.

Of course, there is some fine print usually muttering something about phoning them if you have any queries, but most people don't see it and don't have any queries. Just a depressing acceptance that prices always increase.

What should happen is that right on top of these letters there should be a bold headline screaming "THIS INCREASE WAS GENERATED BY A COMPUTER - PLEASE PHONE US URGENTLY AND WE WILL REDUCE YOUR PREMIUM FOR YOU."

You see, what happens is that the letters are indeed generated by computer after that same computer has done a pretty general calculation on what the overall premium increase should be to keep shareholders happy, and then it just applies it to everyone across the board.

Now, as the average consumer changes his or her insurance company every three years, any insurance company that notices that they have had a customer who has been with them for say five years or longer and who hasn't had any claims, will fall over backwards to keep them happy.

For example, this week I got just such a letter from my insurance company with whom I have been doing business for the past six years and I was told that my premium had gone upon from R1300 to R1600.

I thought it was a bit excessive so I phone their call centre and without even having to ask why I was phoning the operator very quickly confirmed all my details and then said: "I am happy to tell you that your premium has now been reduced to R1100..."

Of course, I was happy, but on the other hand as my new premium is less than my premium for last year it occurred to me that I was an idiot not to have phoned them last year because my premium would be even lower.

So, what the insurance industry expects but is not really saying to us loud enough is "when you get this sort of letter and you have been with us for three years or more and haven't made a claim - PHONE US IMMEDIATELY AND WE CAN GUARANTEE YOU WE WILL REDUCE YOUR PREMIUM."

Frankly the way the insurance industry presents these letters is a shocking indictment on what little integrity they may have.

I have absolutely no doubt that on one hand they are happy to fall over themselves to accommodate existing long term clients but on the other I cannot help thinking that they are silently hoping that not too many will actually think about phoning to complain about the increases.

I cannot imagine the millions of extra profit they make just because so many South Africans are so apathetic that they just accept increases and pay up without complaint.

The argument by the insurance companies that they cannot deal with each individual premium increase is nonsense.  They can easily pull out of their database those long standing clients with no immediate claims history and write to them directly asking them please to call in and discuss the premium increase.

Unfortunately there is no law in South Africa that prevents any company from charging what they like for a product or service.

So, there is nothing illegal about what these companies are doing.

It is just sneaky and underhand.

So my new year's resolution is going to be to query absolutely every request I have from an insurance company for an increase.

And while I am at it, I am going to do that with my bank as well after they charged me R20 last week to put their rubber stamp on a copy of my bank statement.

- Follow Chris on Twitter.

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