It is widely accepted, even by the insurance companies themselves, that short term insurance is a ‘grudge purchase’. In other words it is a payment for something which is intangible and which may never be needed.
Nevertheless, most South Africans accept that insurance is a necessity and, if they can afford it, they buy it, however reluctantly.
As a result of the increase in crime in this country, together with the increasing number of car and home owners, the short term insurance market is growing rapidly and, incidentally, according to the South African Insurance Industry Forecast, providing insurers with huge profits.
Dirty dealing?
Given the amount of money in their coffers, is it disconcerting, to say the least, to read that a respected insurance company like Mutual and Federal were involved in cheating their clients.
Evidence presented by the South African Motor Body Repairers Association (SAMBRA) last year suggested that some Mutual and Federal managers and assessors were “instructing panel-beaters to use pirate and/or second-hand parts, without telling the client.” At least one policy holder backed up the allegation.
Short term insurance brokers claimed that Mutual and Federal’s actions were the result of an effort to make motor vehicle insurance, which is considered very high risk due to the ever-growing number of thefts and hi-jackings, more profitable.
However, as a spokesman for SAMBRA pointed out, by underpaying for repairs to their policy holders’ vehicles or insisting on the use of pirate parts, they were compromising the safety of their clients.
At the time Mutual and Federal denied the allegation, stating that pirate parts would only be fitted under ‘exceptional circumstances’.
Mutual and Federal is not the only insurance company to have been accused of trying to cut costs by insisting on the use of inferior parts. More recently dissatisfied clients of Dial Direct have had similar complaints.
One claimed that the insurance company was ”trying to force the panel-beater to use pirate parts that didn’t fit”, while another unhappy customer said that he was “still sitting with a damaged vehicle after they tried to fit pirate parts”.
A policy-holder with Outsurance also protested when he found that the panel-beaters had been “instructed by the insurance company to fit a local door and fender” to his car, instead of replacing the original parts.
Short term insurers also came under fire for underhand dealings when they were accused of paying motor dealers and furniture retailers excessively high commissions in return for their business, passing on the cost to their policy holders in the form of higher insurance premiums.
A panel of inquiry, investigating the accusation, virtually absolved the insurance industry by blaming “unclear and inconsistent” legislation in the form of the Insurance Act for the ‘irregularities’ and claimed that the “commission contraventions had since been corrected.” Has anyone noticed whether their premiums have been reduced as a result?
Conclusion:
When insurance companies that have been entrusted with the security of our belongings, at considerable cost, are revealed as having being involved in dubious activities at our expense it leaves us in a Catch 22 situation. Given the social and economic circumstances of the country we cannot afford not to have insurance. The question is, can we afford to have it?