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.

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  • alan.jerrold - 2012-12-10 09:35

    10 years ago I read the small print on my insurance policy, and noticed that they only paid out 1/3 of the value on 'electronic items'. So what are the main things that get stolen in a burglary? Electronic items like TV's, hi-fi's etc. I live in a gated complex and work from home, with no high walls between neighbours, and have solid burglar bars and security doors over sliding doors. So I cancelled my householder's insurance except for ('fire and flood' which can wipe out everything). Since then I have saved at least R600 per month over 10 years, and probably more. So far, I am SEVENTY TWO THOUSAND RANDS ahead, which I have put into my bond saving me still more. Taking a chance? Well, it depends on your individual circumstances of course. But I am at least R72 000 ahead right now, and a big flat-screen TV only costs about R10 000 these days....

  • warwick.railton.7 - 2012-12-10 09:42

    Insurance companies are notorious for ripping their clients off – they are a necessary evil and evil becoming a bigger part of the picture. We pay much higher fees in South Africa compared to other world standards, like cell phone fees etc. they really do take us as their personal cash cows and you don’t get all that service they promise you. Loyalty to them means that they can nail you further I’m sad to say bad business practice. We really need some good competent people to look into these companies and get to the bottom of all these increases that are well above the inflation rates. They are a rip off.

  • theo.sauls - 2012-12-10 09:47

    Banks in South Africa makes me physically sick..... I hate them so much

  • schalk.burger.988 - 2012-12-10 09:56

    Thanks alot Chris, I am making that phonecall as we speak!

  • nicolajane.harrison.3 - 2012-12-10 09:57

    I agree, they do think were idiots...they think we don't know that several insurance companies fall under one or two main companies, that's why they don't mind u getting quotes elsewhere.. They end up getting your money regardless!.. They can be real bastards sometimes!

      truthis.tway - 2012-12-10 11:52

      The hippo returns quotes from the same holding company. MiWay, budget, dial direct, 1st for women are all the same company.

      truthis.tway - 2012-12-10 11:52

      The same company that hold the above holds the hippo.

  • jc.jonck - 2012-12-10 10:30

    I'm still baffled by why premiums go up, when the insured assets' value drops every year. Insurance and medical aid...

  • dean.mark.williams - 2012-12-10 10:43

    One way I got my insurance to keep getting lowered every year was by playing the insurances up against one another. If I had insurance with Company A this year, I would phone B, C & D when my annual increase came up and see what they could offer comparatively. I have no loyalty to any of these companies as much as they show me loyalty. And as for their so called 'Money back bonuses', each time I change I save more annually than what they will give me after 3-4-5 years of staying with one company.

  • gary.bloom.967 - 2012-12-10 10:48

    What no-one takes into account is the fact that vehicles depreciate in value. Thus every year your premium should go down. NO broker will call you and tell you that your brand new GTI that you bought has lost 100k of it's value since new.

      sharon.hamilton.737001 - 2012-12-10 15:24

      plus the insurance companies will only pay out "book value" for a car, their book value, excluding the assessors valuation of the vehicle which results in further decreases in the payout. Insurance companies are legal thieves.

  • stephen.j.dickson.3 - 2012-12-10 11:05

    Insurance and Security companies and especially the Banks in South Africa all have a vested interest in the country's crime rate and basically do not want to see it lowered.In fact they rejoice as it increases because it is what keeps them in business and gives them opportunities to fleece the public.Take the Banks for example.As nobody gets salaries paid in cash any more, the Banks are making a mint with deposit and with-drawl fee's. This is due of the high rate of cash in transit heists etc so one is expected to have a bank account in order to secure a job.In fact one of the first questions normally asked in an interview is : " Do you have a Bank Account" This is easy money for the Banks.Once employed the Bank will then milk you for all your worth.The choice is yours on who you do your banking with but basically they are all as bad as each other i.e. ripping the public off in order to finance the lifestyles of a few, golf playing,do nothing executives who are gutless turds that are shielded from any problems by women managers and keeping their inept,incompetent minions who are masters of poor service employed...........bottom line.

      Klaus - 2012-12-10 12:46

      One of those things which really peeeees me of is the number of uninsured cars on the roads, excuse being have no money for insurance, but consequences are for my account no matter what -

      gary.bloom.967 - 2012-12-10 14:40

      My wife has been rear ended by two drivers that had no insurance on two different occasions. To put insult to injury, they both managed to repair their cars before we managed to get my wife's car sorted. It should be the LAW to have at least 3rd party on your car. I'm done with deadbeats.

  • mark.morgan.733 - 2012-12-10 14:05

    I too received and letter from my insurance company whom i have being with for over 30 years,they increased my premium by 30%.When i contacted them and asked why,they then changed it and increased my premium under 10%.The moral of the story is contact them and ask why just dont accept it.

  • allan.e.basterfield - 2012-12-10 15:06

    This happened to me......I reduced my premiums from R1200/month to R360/month simply by phoning around and not accepting the 'sob story' my previous insurer gave me!!!

  • staal.burger.9 - 2012-12-10 18:57

    May I have the name of your bank? Mine charged me R35 for that very same stamp!

  • john.cryink - 2012-12-11 06:52

    Interesting checked my policy document 3 of the pages the reasons for payment 77 of the rest the reasons they do NOT pay

  • Tawizee - 2012-12-11 10:05

    I received am SMS from my bank that i qualify for a FREE gold card. When I went there to collect they told me I had to pay R68 for logistics and "admin" .Death

  • megan.muller.524 - 2012-12-11 14:15

    Ppl who deal with insurance companies directly are idiots. This is the price u pay for the low premium u get. Do ur insurance through a reputable broker and u will not get these nasty letters in the post. Your broker has a vested interested in keeping u happy as well as with the insurance company they place u with. And by the way the insurance industry is being regulated but the direct insurers are not. So think before calling them for a quote. Also like any businesses insurers want to make profit so they are not happy when claims are paid due to crime which is high in this country. I know this as I work for one of them.

  • gus.fernandes.7 - 2012-12-11 17:35

    The insurance business must be extremely profitable judgeing by the non stop ads one sees on the SABC. The number of insurance companies advertising on tv is unbelievable. They advertise more than even cell phone companies.

  • matt.mills.9047 - 2012-12-11 21:35

    Bottom line is all these comments are from people who use Direct Insurers and dont use a your own peril and prejudice.

  • matt.mills.9047 - 2012-12-11 21:36

    Bottom line is all these comments are from people who use Direct Insurers and not a your own peril.

  • jimmy.murphy.9615 - 2012-12-12 18:52

    Sounds to me like Chris' story is a perfect example of why consumers are better off buying their insurance through a broker, as opposed to directly from an insurance company. Although I am unfamiliar with the particulars of the South African Insurance Distribution network, in other Commonwealth nations, consumers have the option of having an Insurance Broker solicit and manage the relationship between them and their insurance companies. When unfounded rate increases are proposed or restrictions on coverage (like alan.jerrold's 1.3 value on electronics), the broker has the option of negotiating the rates or soliciting competing prices from other insurance companies. My #1 reccomendation: Find a good broker who you can trust.

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