The only thing worse than paying for insurance is not paying for insurance and being T-boned at an intersection by (another) un-insured driver - or having your geyser burst over your desk and destroy all your electronics.
But it’s followed closely by paying too much for insurance. And realising you have been doing it for a long time.
Last week I took a morning off my usual routine and saved R20 000 over the next 12 months.
It happened as I decided I was long overdue some proper “adulting.”
For the first time in years, I paid attention to my insurance policy documents, and not only got a better deal but found a litany of mistakes and omissions which might have negatively affected any claims I might have had, should disaster have struck.
None of us likes admin. I would much rather be trawling the internet looking for leads, or meeting sources in dark corners of coffee shops, or developing new creative slides and stories for my public speaking tours.
It turns out that a little spring-cleaning of my personal finances will free up some cash that for far too long has found its way into the coffers of an insurance company rather than into investing in my family’s future. That is no good at all.
I have been watching my monthly direct debits with growing alarm over recent months and it made me realise just how an already high cost of living in South Africa was being made even worse by the fact that we feel the need to insure ourselves against multiple possible disasters.
You are more likely in South Africa to be involved in an accident with an uninsured driver than many other parts of the world. Our accident rates are also high. So, we take out vehicle insurance.
The public hospital sector in South Africa is sub-standard by any measure. So, you take our private medical insurance.
The social security net in South Africa exists but is poor as a result of the chasm of inequality: there are far too few people in work relative to those who depend on state support. So, you take out insurance to provide you with an income when you are sick, if you become disabled or if you die and your dependents have lost their primary breadwinner.
The odds of being robbed in South Africa are also high relative to many parts of the world, so you insure your personal possessions. You consider the impact of a home invasion and you pay for cover to ensure you can replace what is taken. You also realise that the odds of a mugging or a smash and grab are higher here so you insure your moveables. Your laptop. Your tablet. Your phone. You can even buy medical aid for your dog.
The point is that if you spend enough time talking to an insurance salesman they will, with the look of a concerned uncle who moonlights as a weekend undertaker, advise you about the level of cover you need and the consequences of not having enough insurance in the event of disaster striking.
Sadly, in SA they might just have a point.
After looking at all of these insurances last week I got a bee in my bonnet and made an appointment with a competing broker. I then WhatsApped my broker. This is the conversation that followed.
09:11 BW: “Hi (Mr Broker) Please could you provide my most recent copy of my policy schedule and whether you can improve any elements on it. I have an independent broker coming to see me on Friday and will be taking advice on short-term cover from them.”
11:45 BW: “What is “retail value”- replacement with new vehicle or book value? If the latter, surely insurance should decline annually, in line with depreciation.”
11:47 Broker: “Driving sorry, will revert soon”
11:54 BW: “Roger” (I know. Who the hell says “Roger”)
12:22 Broker: “Bruce, thank you for your transparency, I would HATE to ever see you moving from me as a client. However I assure you that if you send me ANY cheaper quote out there on a like-for-like basis – I as your intermediary to ********* will make sure we will be able to counter offer it / negotiate a better rate on your behalf.”
12:27 BW: “Sorry. Don’t have time for those games. You’ll know soon enough if I have a better offer!”
12:27 Broker: “Retail Value is a standard term used by insurance companies to determine the regulated price of certain assets. Traditionally, policyholders had to choose their own values for all their insured assets and it would often be inaccurate. Thanks to technology insurers are able to get the info directly from Transunion and take the onus off the client. Retail is the exact cost of your exact mode of vehicle. The highest value/replacement of same car same year model etc. Market is another one from Transunion which is approx. 20% lower.”
12:27 BW: “So book value?”
12:28 Broker: “Basically yes”
12:28 Broker: “Retail is not book value”
12:30 BW: “Why does cost of insurance not decline with declines in value. Curious”
12:32 Broker: “Inflation. Let me explain; Comprehensive insurance is priced on a complete restoration cost of the said vehicle. While the value of replacing the car (total loss/write off) goes down with time- the cost of repairing or restoring that vehicle increase every year. Total loss claims are a very small portion of the premium. The bulk of claims are repair jobs.”
12:33 BW: “Shopping now”
12:34 Broker: “Hopefully not for cheaper insurance. Have an awesome day and please feel free to contact me at any time.”
12:37 BW: “Yes, for cheaper insurance”
1237 Broker: “OK. I understand. Let me know please, how I can be of assistance”
12:40 BW: “I did ask. And now have something to work with!”
12:41 Broker: “Ok. Completely understand. Always on standby for you”
12:53 BW: “Just to clarify. The current cost is and remains your best offer. Just don’t want to be wasting any time going back and forth.”
12:55 Broker: “I will ask our pricing guys for a rate review regardless. Normally I need to prove to them that my client can get a better rate with a competitor schedule. Please give me till close of business.”
By 15:49, after updating address details and making corrections (which I am certain I had asked for previously, but cannot prove) the premium was reduced by a third.
Pay attention. You are a grown-up. Take responsibility for your finances. The more you are paying the better customer you are and there is no incentive for the commission earning broker nor the insurer to cut the amount you pay them. And, they will automatically increase your premiums annually which has a compounding negative effect on you.
Never take no for an answer.
Insurance companies know we don’t like admin. It’s an effort to get an alternative quote - especially “like-for-like” comparisons. Insurers now offer a smorgasbord of apparent benefits and reductions. If you eat lettuce for breakfast you can get a discount on tyres. That sort of nonsense makes direct comparisons impossible and hard for regulators to regulate. Very clever. But frustrating.
Cheaper is not necessarily better. Understand the consequences of a lower premium, especially if your excess (the amount of money you have to pay first before a claim will be considered) is high relative to another quote.
Spend time reading and understanding policy documents. Make sure the addresses of where you have your stuff and where your car spends most of its time are accurate.
Insist on seeing your broker at least once a year (avoid the danger of being upsold). I have not seen mine to discuss insurance for more than two years. (Perhaps as a result of me taking my life and critical illness cover elsewhere, as the wording of his firm’s documents left me uncertain about what constituted a disability in my case)
Review what it is you actually need. Look at your personal risk profile. Consider where you live. Consider how much risk you are willing to assume. Ask yourself whether if your house did burn down, and I know of a couple of people in expensive homes to whom this has happened in recent years due to electrical faults, whether you would have kept up the inventory to get everything replaced at current values and really trim down what is not necessary.
The exercise has made me seriously question insurance company’s risk models. How could an insurance company, if it was pricing me on risk, cut so much off my insurance bill for fear of losing me as a client?
I will be watching their next premium increase (should I stick with them)
As for the competitor quote, the meeting didn’t happen. The guy’s car broke down. I waited for him and waited and when I finally reached him, he told me he’d left a voicemail to cancel the day before. Who listens to voicemails anymore. And has he not heard of Uber?
The risk of being a cheapskate, it turns out, is that insurance salesmen would seemingly rather look for easier targets than you.
But don’t let the blighters see you coming.Bruce Whitfield is a multi-platform award winning financial journalist and broadcaster.