Which industry employs the biggest crooks? The answer would no doubt depend on who you asked. My vote would be for personal fitness trainers. They promise a heavenly body but there is nowhere near enough gain to justify the pain they inflict on innocent civilians. Many others would probably settle on and name the short term insurance industry as the biggest bunch of crooks.
There might be some merit in that view; however, the Financial Services Board has done its very best to de-crook the industry over the past few years. Others argue that the FSB has used compliance legislation as a weapon of mass disruption. Despite that, any objective person would acknowledge that this legislation has done much to force everyone to play fair. Well, fairly fair.
The problem with insurance is that it is based on a promise. It is the promise that if you are the victim of some uncertain future event there is (an equally uncertain) hope that the insurer will pay your claim. That is none too comforting. So, how can you tell if your insurance is any good before it is too late? There is no easy answer. Apparently the whole ‘try before you buy’ idea is greatly frowned on by insurers. Even the insurance ombudsman, who is an expert frowner, would redirect his frowning from insurers to customers if they were to try sneaking in a ‘test’ claim.
There are, however, a few pointers that people would do well to follow in order to avoid disappointment. Firstly, always remember that an insurance policy is a legal contract. Insurers will pay you according to their obligations in terms of that contract. Nothing more, nothing less.
They are no different to anyone else who is contractually obliged to pay you. Your bank, for example, does not usually include an extra one hundred rand note when you make a withdrawal at the ATM. Your insurer is just as unlikely to make such a touching gesture. With that in mind, you need to either read your policy wording or get your broker to talk you through it.
If you are with a direct insurer, just for kicks, ask the telesales agent to read the whole policy wording to you over the phone. Either way, you need to have a reasonably good idea of what is covered and what is not covered. People sometimes assume that policies offer some sort of a blanket cover for ‘whatever may happen’. This is definitely not the case. A client once summed it up succinctly when he said that “that umbrella seems to have some holes in it”.
Secondly, short term insurance operates in a highly competitive environment. This means that insurers are constantly under pressure to offer super-cheap premiums to their clients. That sounds great, but any pessimist worth his salt will tell you that inside every silver lining there is a dark cloud. In this case there is some truth to that. When insurers do not charge enough to cover the cost of claims they obviously trade at a loss. Now here is where the shareholders also get a bit of frowning action. The object of their disapproving gaze would be the company’s CEO and his team.
They would then share the love all the way down from their lofty perch to earth below, and then down to Cinderella who processes that claim from the bowels of the deepest mineshaft of the corporate hierarchy. As you may well imagine, Cinderella has neither the disposition nor the incentive to try and find a reason to pay the claim.
Remember that insurers are unique – just like everyone else. As with any other industry, you will not always get what you pay for, but you will definitely not get more than you pay for. So the moral of the story is that you need to weigh your options carefully and not to assume that the cheapest insurance is the best value for money.
* Names have been changed to protect the identity of the individuals mentioned.
John Stebbing is director at Camargue.