Vis Govender, CEO of FirstEquity Group, said getting insurance cover is a complex process and some people often fall into a trap of paying too much attention on reducing their premiums and neglect the fine print.
“Deciding which policy to choose can be a confusing and complex affair. Historically, one of the only ways to make this decision has been to compare prices and choose the most affordable cover without much consideration for the quality of cover,” said Govender.
“Consumers had little to no insight into the many intricacies of insurance policies, as acquiring coverage was either done via a call centre, a direct insurer, an insurance agent who only offered one product or it was left to third parties such as an insurance broker to make this choice on your behalf.
“Even today, many insurance companies often advertise to consumers, promising to match or beat the premiums you pay if you switch over to them, again, with no reference to scope of cover or any restrictions on their policy. This is almost as absurd as offering to match the price of a car you’re buying without asking what car it is.”
He said not all insurance products are the same.
"For example, an insurer might be offering motor vehicle or household insurance that looks similar to others in the market at a lower price, but on closer inspection, the lower priced product might have restrictions such as ’you’re not allowed to use the vehicle to drive to work or meetings’, or have cover exclusions such as ‘hail damage is not covered’, or warranties such as ‘your watches worth more the R5,000 must be kept in a locked safe at all times when not being worn’.
“These are obviously material to know and may not be the case on your higher priced product which may also come with a lower excess and a better claim processing experience,” he said.
It’s therefore important for consumers to take the time, shop around, and compare insurance options beyond just premiums.
He said consumers need to know the difference between “all risks and defined perils” and to also pay attention to exclusions.
"With a defined perils policy you are explicitly told what you are covered against, for example ‘fire, storm, explosion, theft, etc.’ and when you have a claim you need to show that the cause was one of these pre-defined perils.
“Whereas the all risks policy turns this on its head and covers you against everything that could go wrong except specifically what it says is not covered, so when you have a claim, the insurer will pay unless they are able to show that the cause of the loss was one of the specifically excluded perils.
"The all risks policies are often broader in coverage and easier to deal with at claim stage but may come at a higher cost,” said Govender.
How to pick the best insurance cover option
Consumers need to compare options beyond just premiums
Image: 123RF
Lucas Tsotetsi thought he had scored himself a great deal when he switched his car insurance for a cheaper one that saved him R500 in monthly premiums.
He had been paying almost R2,000 for his 2018 BMW 2 Series but his computer repair business in Randburg, Johannesburg, took a financial knock at the height of the Covid-19 pandemic in 2020.
“I was barely surviving and struggling to make ends meet for my family and my two teenage children were in varsity at the time. I then got a call from an insurance broker who sold me what I thought was a good product. The call lasted barely 15 minutes. He said he’d cut my premiums by 25%. I was sold immediately,” said Tsotetsi who immediately cancelled his insurance of three years.
Months went by without any hassles until last year his car was rocked by a hailstorm which severely damaged its roof.
“I submitted a claim to my insurance and it was immediately rejected when they found out the cause of the damage. They flatly refused to pay, saying hail damage was excluded in my policy and that had I gone for a higher and more comprehensive cover they would have fixed my car,” said Tsotetsi.
Tsotetsi resorted to fixing his car from his own pocket which set him back by almost R15,000.
“I realised that the back and forth between me and them wasn’t helping. I cancelled my policy with them and took my business elsewhere. I regretted not listening attentively to that insurance broker and for not going through my policy document carefully. I should have been more rigorous when I was switching insurers,” said Tsotetsi.
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Vis Govender, CEO of FirstEquity Group, said getting insurance cover is a complex process and some people often fall into a trap of paying too much attention on reducing their premiums and neglect the fine print.
“Deciding which policy to choose can be a confusing and complex affair. Historically, one of the only ways to make this decision has been to compare prices and choose the most affordable cover without much consideration for the quality of cover,” said Govender.
“Consumers had little to no insight into the many intricacies of insurance policies, as acquiring coverage was either done via a call centre, a direct insurer, an insurance agent who only offered one product or it was left to third parties such as an insurance broker to make this choice on your behalf.
“Even today, many insurance companies often advertise to consumers, promising to match or beat the premiums you pay if you switch over to them, again, with no reference to scope of cover or any restrictions on their policy. This is almost as absurd as offering to match the price of a car you’re buying without asking what car it is.”
He said not all insurance products are the same.
"For example, an insurer might be offering motor vehicle or household insurance that looks similar to others in the market at a lower price, but on closer inspection, the lower priced product might have restrictions such as ’you’re not allowed to use the vehicle to drive to work or meetings’, or have cover exclusions such as ‘hail damage is not covered’, or warranties such as ‘your watches worth more the R5,000 must be kept in a locked safe at all times when not being worn’.
“These are obviously material to know and may not be the case on your higher priced product which may also come with a lower excess and a better claim processing experience,” he said.
It’s therefore important for consumers to take the time, shop around, and compare insurance options beyond just premiums.
He said consumers need to know the difference between “all risks and defined perils” and to also pay attention to exclusions.
"With a defined perils policy you are explicitly told what you are covered against, for example ‘fire, storm, explosion, theft, etc.’ and when you have a claim you need to show that the cause was one of these pre-defined perils.
“Whereas the all risks policy turns this on its head and covers you against everything that could go wrong except specifically what it says is not covered, so when you have a claim, the insurer will pay unless they are able to show that the cause of the loss was one of the specifically excluded perils.
"The all risks policies are often broader in coverage and easier to deal with at claim stage but may come at a higher cost,” said Govender.
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